Analyst: The significant deleveraging in the current market has reduced the possibility of a sharp decline, but at the same time limited the potential for upward short selling BlockBeats News: On March 5th, independent crypto analyst Axel posted that the Bitcoin perpetual contract funding rate chart shows that the funding rate remained in the negative area throughout February and early March 2026, indicating that short positions dominated the perpetual futures market. Since late January, the funding rate has frequently fallen into the negative zone, and in the past two weeks, it has remained in this zone with almost no rebound. The most extreme readings occurred on February 28th and February 25th, when prices were testing local lows around $64000 to $65000. As of March 4th, the rate is still slightly negative, but the accumulated negative funding rate over the past two weeks indicates a sustained bias towards short positions. Negative funding rates mean that holders of short positions pay fees to holders of long positions to maintain their contracts, indicating a bias towards short positions. Historically, this situation has either indicated that any upward impulse may trigger a short squeeze, or confirmed a bearish trend if the decline persists. The key triggering factor for emotional reversal is the sustained positive return of funding rates, while prices consolidate above key resistance levels (around $70K), and the volume of open contracts stabilizes or increases. In addition, the chart of open contracts for Bitcoin futures denominated in US dollars shows a decrease from a peak of $47.6 billion in October 2025 to $20.8 billion in March 2026. This decrease can be partially explained by the decline in BTC prices, but the overall trend points to a decrease in derivative leverage during the adjustment period. The open interest volume of futures denominated in US dollars has decreased by more than half from its peak in October 2025 ($47.6 billion), and by about one-third from its peak in January ($32 billion). As of March 4th, the open interest volume was $20.8 billion, a level only seen before the start of the uptrend in 2025. In the past 7 days, the open interest contract volume has decreased by 3.2% again, and deleveraging continues, although the pace has slowed down. The decrease in the amount of open contracts as prices fall is a signal of mandatory or voluntary liquidation, indicating that the market is indeed shedding its burden. This distinguishes the current situation from typical short selling scenarios, where at lower levels of open interest, there is usually less mechanical fuel used to trigger liquidation cascades, although localized short selling may still occur. The risk of further downward liquidation cascades is lower than in January. Overall, the picture depicted by these two indicators is more subtle than at first glance, as leverage has left the market (the amount of open contracts has decreased from $47.6 billion to $20.8 billion), while the remaining participants mainly hold short positions (negative funding rates). This combination reduces the risk of downstream clearing cascades, but also limits the potential for spontaneous short selling - there is less fuel in the system.