Before a flush, funding is usually one-sided — the crowd is leaning, and paying to lean. After a genuine deleveraging that condition should be gone, because the leaning positions are the ones that were closed.
So funding is the confirmation. It is published, it updates every interval, and it is difficult to misread once you know what you are looking for.
The three outcomes
Funding normalises toward neutral. The crowded side was cleared. This is the ordinary healthy resolution and it usually accompanies open interest falling.
Funding overshoots the other way. Not only was the crowd cleared, the survivors are positioned opposite. That is a stronger version of the same reading — and it means the fuel now leans the other direction.
Funding stays one-sided. The move happened and the positioning did not change. The crowd was scared and did not leave, so the same cascade remains available at the same levels.
The third is the important one, because price alone reads it identically to the first.
Read per venue, not blended
A flush can clear one venue and leave another intact, since each venue has its own leverage and its own rate. An average across venues can show a comfortable normalisation while one exchange still carries a crowded book — and that is where the next event starts.
Confirm with open interest
Funding says which way the survivors lean; open interest says how many there are. Funding neutral with open interest unchanged means positions were re-established as fast as they were closed, which is a very different market from one that genuinely deleveraged.
The pair together is the read, exactly as in what a deleveraging event leaves behind.
The limit of it
None of this says where price goes. It says whether the mechanical amplifier has been reset. A market can deleverage completely and continue falling on ordinary selling — the discipline that runs through all of this being that positioning data describes how a market will move, never which way.