how to spot market reversals using funding extremesBitcoin / TetherUSBINANCE:BTCUSDTTrade_Logic_AII love those moments when funding goes totally crazy. That’s where the market quietly whispers: “Hey, someone’s about to get wrecked.” Let’s talk about how to catch reversal spots when funding is skewed – in plain English. Perpetual futures have this thing called funding. Simple version: If funding is positive, longs are paying shorts. If funding is negative, shorts are paying longs. So when funding is very positive, it means people are so desperate to stay long they’re literally paying a fee every 8 hours just to keep their position. Same with huge negative funding – everyone is leaning short and paying to bet on doom. Now, here’s the trick: funding extremes often show where the crowd is trapped. And trapped money is where reversals are born. Imagine BTC has been pumping for days. Your feed is full of “to the moon,” funding is insanely positive, open interest is climbing, and every small dip gets aggressively bought. But price suddenly stops making higher highs, starts chopping, throwing long wicks, and yet funding is still overloaded positive. What does that tell me? Longs are crowded. Late buyers are FOMOing in. Everyone is already on one side of the boat. If price drops even a bit, those overleveraged longs start getting squeezed, forced to close, which adds more selling, which triggers more liquidations. Bam – reversal or at least a nasty pullback. Same thing flipped on the downside. Market nukes, funding becomes massively negative, shorts are comfy and talking about “zero soon.” Price stops making lower lows, starts grinding sideways, wicks down get bought, but funding is still super negative. That’s my radar ping: shorts overcrowded, any squeeze up can trigger panic covering and drive a sharp reversal. How I use it in practice: First, I look at trend and key levels on the chart. No magic, just basic support, resistance, highs, lows. Then I check funding. Is it extreme in the same direction as the move? Are traders paying a stupidly high fee to stay in an already crowded trend? If yes, I don’t jump in blindly. I wait for price to show me weakness: failed breakout, fakeout above highs, long wick rejection, or a sharp move back into the range. That’s where I start hunting for entries against the crowd, with tight risk. Maybe I’m wrong, but most big emotional moves I’ve traded had the same pattern: price extreme + funding extreme + herd confidence at 100%. One warning: skewed funding is a signal, not a green light to yolo countertrend. Strong trends can stay overfunded longer than your account can stay alive. Always pair funding with structure and a clear invalidation level. But if you learn to read when the crowd is overpaying to be on the “obvious” side, you’ll stop being exit liquidity… and occasionally become the one flipping the trend on their heads.