Derivatives Funding Rates Collapse To 2022 Lows As Billions Liquidated — Is Bitcoin Set To Rebound?

What Happened

Notably, the collapse occurred as a Satoshi-era whale opened over $1.1 billion in short positions against BTC and ETH just before President Trump’s tariff announcement, ultimately generating an estimated $190 million to $200 million in realized profits.

The crypto industry was set for a flood of ETF approvals in October, with the SEC scheduled to make final decisions on at least 16 applications, plus another 21 filed in the first eight days of the month.

The controversial whale’s new bearish position comes just days after accusations of insider trading for timing the previous short 30 minutes before Trump’s tariff announcement.

Market Context

Crypto derivatives funding rates plunged to their lowest levels since the 2022 bear market following the largest liquidation event in history, with Glassnode data showing altcoin funding rates collapsed to a median of -0.4% before resetting above zero within 24 hours.

The swift recovery in funding rates following the purge of over $19.33 billion in leveraged positions suggests the market may have completed one of the most severe deleveraging events in crypto history.

Altcoins Suffer -20% Median Drawdown as $10B BTC Open Interest Vanishes

Glassnode co-founder Rafael analyzed the market carnage, noting that while Bitcoin corrected comparatively mildly, altcoins experienced one of the sharpest daily drawdowns in years, with median returns reaching -20%.

Bitcoin alone saw over $10 billion in open interest erased across all major exchanges, which is the largest open interest wipeout in history.

Polymarket bettors now show a 98% prediction that the government shutdown will continue past October 15, up from 43% on October 2.

Whale Returns With New $163M Short as Market Digests Crash

Why It Matters

According to Rafael, Hyperliquid’s liquidation heatmap was “virtually wiped clean” with levels both above and below spot triggered, likely driven by the rapid buildup of liquidation clusters in cross-margined accounts.

Crypto analyst MLM suggested that the trader “played a huge role in what happened” and may have contributed to the weekend’s liquidation cascade.

Details

The same trader has since returned with a new $163 million short position on Bitcoin with 10x leverage, already up $3.5 million in unrealized profit, though facing liquidation if BTC climbs to $125,500.

Glassnode’s Bitcoin Long/Short Bias chart, which tracks the aggregate net positions of the largest traders on Hyperliquid, showed a steep rise in net shorts starting on October 6, well before Friday’s crash.

While levels have since recovered, they remain profoundly negative, prompting Rafael to urge traders to “stay cautious.”

ETF Inflows Continue Despite Government Shutdown Delays

From October 6 to October 10, spot Bitcoin ETFs recorded net weekly inflows of $2.71 billion, with BlackRock’s IBIT leading at $2.63 billion.

Spot Ethereum ETFs saw net weekly inflows of $488 million, led by BlackRock’s ETHA with $638 million.

The strong institutional demand comes as at least 16 exchange-traded funds await SEC approval, with decisions delayed by the government shutdown now entering its third week.

Nate Geraci of ETF Store noted that “once government shutdown ends, spot crypto ETF floodgates open,” calling it “ironic that growing fiscal debt and usual political theater” are holding up approvals for crypto products designed to address those exact issues.

The shutdown began after Republicans and Democrats failed to reach a funding agreement by October 1, leaving the SEC operating with only essential staff.

Republicans demand rolling back spending to reduce the national debt, now exceeding $37.8 trillion, approximately $111,000 per person, while increasing funding for border enforcement.

Democrats oppose healthcare cuts and seek extension of expiring tax credits.

The Senate isn’t scheduled to hold votes until Tuesday, leaving no immediate avenue to end the stalemate.