Bitcoin futures index trend: Bear market signals from funding flow data

Analyst Axel Adler Jr.'s research reveals critical trends in the Bitcoin market, signaled by two significant technical indices. These indicators collectively paint a dangerous picture, where the market faces extreme pressures and liquidity challenges. The trends observed since early 2023 suggest a deepening bear market phase.

Funding Flow Index and Its Critical Trend

According to BlockBeats data, Bitcoin’s futures funding flow index experienced a sharp decline from approximately 50% to a critical 7.1%—the lowest level on its scale. This index’s fundamental role is to connect price dynamics with derivative funding flow signals, providing insight into capital movements and market sentiment.

A decline in the index is the strongest signal of a strengthening bear market. Since one of the critical moments in January 2023, the index dropped below the 45% threshold, marking entry into a stable bear territory. Historical analysis shows that a 7.1% reading typically corresponds to a capitulation zone—when selling pressure pain peaks.

To observe a significant trend reversal, the index must rise above 45% and prices need to stabilize. So far, any recovery remains just a technical correction within the bear structure, not a fundamental shift to a new market phase.

Local Stress Index: Pressure and Market Capitulation

The second critical tool—the Bitcoin Local Stress Index (LSI)—integrates volatility, funding rates, and leverage levels into a comprehensive stress indicator. This index consolidates all market pressure factors into a single number.

During the price decline below $78,000 in late January 2023, the LSI rose to a maximum of 92.5. At this point, the index entered a “tail risk warning” mode, indicating that all pressure factors activated simultaneously—downward price trend, increased volatility, and declining funding rates.

The current LSI reading of 73 remains in a “high” risk zone. Historical data shows that when the LSI exceeds 90, it often coincides with local price lows—markets may begin to stabilize after extreme pressure releases. If the index drops below 80 after new waves of pressure, it signals potential further declines similar to a waterfall.

What These Indicators Signal About Market Trends

Both indices together demonstrate an unprecedented market pressure—extremely low funding flow index combined with maximum local stress levels. This combination is characteristic of market “capitulation” moments, when selling pain finally reaches a limit and the market begins to absorb large liquidity shocks.

The trends observed in these indices indicate market recovery attempts, but not a fundamental rebound. In the coming weeks, attention should be paid to whether the indices can break through key threshold levels or remain in a bearish regime.