Analyst: Index Indicates Market in 'Capitulation' Stage, Still Faces Further Downside Risk

By: theblockbeats.news|2026/02/03 00:04:17
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BlockBeats News, February 2nd, analyst Axel Adler Jr. stated that the "Bitcoin Futures Funding Rate Index" combines price dynamics with derivative funding flow (buy volume + open interest change).

Since last Friday, the funding rate index has plummeted from around 50 to a critical 7.1%, at the lower end of the index scale range and also an extreme value in the past month. The continuous marked price trend since January 28 has confirmed the ongoing bearish market status. The key point is that since January 30, the index has dropped below the 45% threshold, which, by model definition, signifies entering the bear market territory.

Historically, a reading of 7.1% usually corresponds to a market capitulation area. To achieve a state transition, the index needs to rebound to above 45% and the price needs to stabilize. Prior to that, any rebound is still technically a correction within the bear market structure.

Another index, the "Bitcoin Localized Squeeze Index," integrates volatility, funding rates, and leverage levels to form a comprehensive pressure indicator. On January 31 (Friday) night, when the price dropped below $78,000 in a sell-off, the index briefly surged to a peak of 92.5. Throughout the weekend, the index remained in a "tail risk alert" state – indicating all pressure valves (downtrend + increased volatility + biased funding flow) were simultaneously activated. The current reading of 73 is still in the "high" range.

Historically, when the index exceeds 90, it often aligns with a local price bottom. If under a new round of pressure, the LSI once again breaks through 80, it will signal a continuation of a waterfall-like decline.

These two indicators together paint a picture: the funding rate index is at an extreme low, while the localized squeeze index is at a peak. This is precisely the characteristic of a market "surrender" – when pressure reaches its limit, the market begins to absorb liquidity shocks.

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