Bitcoin Sees High Open Interest, Low Funding Rates In New Short Squeeze Cue

Bitcoin (BTC) is due a classic “short squeeze” as open interest hits five-week highs, says new analysis.

Key points:

• Bitcoin is seeing a combination of rising open interest and negative funding rates.

• The result could punish short positions, with funding rates at the most negative since early February.

• Large-scale Bitcoin speculators are net long BTC again.

Bitcoin short squeeze likelihood “increasing”

In one of its “Quicktake” blog posts on Saturday, onchain analytics platform CryptoQuant said that Bitcoin was “crowded” with short positions. 

“BTC is flowing out of exchanges while funding rates remain strongly negative, creating an increasingly crowded short positioning environment where the potential for a short squeeze is building,” contributor CoinNiel summarized.

After BTC/USD passed $73,000 on Friday, traders appeared eager to trap those entering the market who were betting on continued price upside. Funding rates stayed negative on exchanges, while open interest grew to $24.2 billion — its highest since early March.

“Since March, negative funding has become more frequent, and throughout April it has remained in negative territory without flipping positive,” the post continued. 

“This indicates that short positions dominate the market, with shorts paying longs, and such extreme positioning can act as a trigger for a reversal through forced liquidations.”

CoinNiel said that the combination of rising open interest and negative funding rates “suggests that leveraged short positions have been rapidly accumulating.” 

“The slight decrease does not yet indicate a meaningful deleveraging phase,” he acknowledged.

Fellow contributor Gaah agreed, noting that funding rates had hit their deepest negative value since Bitcoin’s dip to multiyear lows at the start of February.

“Caution is needed when establishing positions in current range, since it represents an area of buying demand,” he wrote in a further Quicktake post. 

“Bears trapped? Likelihood of a short squeeze is increasing.”

Trader: Bitcoin speculators copying 2023 rebound

Earlier, Cointelegraph reported on short liquidations staying modest despite the BTC price upside. 

Related: Bitcoin analysis sees $55K BTC price ‘iron bottom’ by December 2026

Data from CoinGlass showed that over the 24 hours to the time of writing, cross-crypto liquidations totaled less than $100 million.

Sentiment among market participants, meanwhile, has gradually begun to favor fresh upside, with targets including $80,000 and higher.

On Saturday, crypto trader Michaël Van de Poppe eyed increasing belief in a BTC price rebound among large-volume speculators.

“Speculators are net long on Bitcoin. Very similar to previous cases where we’ve seen the same before a big breakout in 2023,” he wrote in a post on X.