Bitcoin sets up potential short squeeze as 'funding rate' plunges to three month low
TL;DR
Bitcoin's perpetual funding rates plunged to -6%, matching a three-month low, signaling aggressive short positioning. This, combined with rising coin-margined open interest, sets up a potential short squeeze as BTC attempts to reclaim $64,000 after dropping to $63,000.
Key Takeaways
- •Bitcoin perpetual funding rates dropped to -6%, matching the most negative level in three months, indicating aggressive short positioning.
- •Coin-margined open interest rose to 687,000 BTC, showing increased market participation despite price volatility.
- •Deeply negative funding rates and rising open interest create conditions for a potential short squeeze if Bitcoin reclaims key resistance levels.
- •Over $500 million in crypto positions were liquidated in 24 hours, with long positions accounting for over $420 million of that total.
- •Bitcoin is on pace for its fifth straight monthly loss, its worst such streak since 2018, amid a broader market regime shift.
What to know:
- Perpetual funding rates dropped to -6%, matching the most negative level in three months, signaling aggressive short positioning as bitcoin briefly fell to $63,000.
- Coin margined open interest climbed to 687,000 BTC, indicating increased participation despite the price swing.
- Perpetual funding rates dropped to -6%, matching the most negative level in three months, signaling aggressive short positioning as bitcoin briefly fell to $63,000.
- Coin margined open interest climbed to 687,000 BTC, indicating increased participation despite the price swing.
Bitcoin is looking to reclaim $64,000 on a possible short squeeze after earlier falling to as low as $63,000 following U.S. and Israeli strikes on Iran.
At the same time, perpetual futures funding rates dropped to -6%, according to CoinGlass, marking the second lowest level in the past three months. The last time funding was this negative was on Feb. 6, when bitcoin bottomed near $60,000.
Perpetual funding rates represent the periodic payments exchanged between traders in perpetual futures markets. When rates are positive, traders holding long positions pay those holding shorts. When rates turn negative, shorts pay longs.
Deeply negative funding typically signals aggressive short positioning and bearish sentiment, as traders are willing to pay a premium to maintain downside bets.
Meanwhile, coin-margined open interest rose from 668,000 BTC to 687,000 BTC over the past 24 hours.
Measuring open interest in BTC terms removes the distortion caused by price swings. Rising open interest alongside negative funding suggests growing participation, with an increasing share of traders positioned for further downside.
In the past 24 hours, more than $500 million in crypto positions have been liquidated, according to CoinGlass data. The bulk of those liquidations were long positions, totaling over $420 million, highlighting the scale of forced selling as prices moved lower.
- Many crypto social media users on X worry that Iran could close the Strait of Hormuz, a key route for about 20 percent of global oil shipments, potentially sending oil prices toward $120 to $150 and triggering an inflation shock.
- Several experts argue that a full closure of the Strait is unlikely or impractical and that any oil price spike would likely be limited and temporary.
- An all-out war could still rattle markets and push bitcoin lower.
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