Bitcoin Shorts Get Squeezed as Funding Plunges to -6%

If you shorted bitcoin at $63,000 yesterday, you might want to check your position. Funding rates just plummeted to -6%, matching the most bearish sentiment we've seen in three months.

When Everyone's Betting Against Bitcoin

The derivatives market is painting a clear picture: traders are aggressively positioned for more downside. Perpetual funding rates hitting -6% means short sellers are paying a hefty premium to maintain their bearish bets. The last time we saw this level of negative funding was February 6th, when bitcoin bottomed near $60,000.

But here's what makes this setup particularly interesting: coin-margined open interest climbed from 668,000 BTC to 687,000 BTC over the past 24 hours. Even as prices tumbled on Middle East tensions, more traders piled into the derivatives market, with an increasing share betting on further declines.

The Liquidation Cascade

The selling pressure was brutal. Over $500 million in crypto positions got liquidated in 24 hours, with long positions accounting for more than $420 million of that carnage. When bitcoin briefly touched $63,000, it triggered a cascade of forced selling that highlighted just how leveraged the market had become.

Yet amid this chaos, something curious happened. Bitcoin didn't collapse further. Instead, it found support and began eyeing a recovery toward $64,000. This price action, combined with the extreme negative funding, is setting up what could be a textbook short squeeze.

The Contrarian Setup

Negative funding rates of this magnitude often mark inflection points. When everyone's positioned for more downside, it doesn't take much buying pressure to trigger a reversal. Short sellers who've been paying to maintain their positions suddenly face a dilemma: hold and keep bleeding funding costs, or cover and risk missing the move lower.

The 687,000 BTC in open interest represents a massive amount of potential buying power if shorts start covering. Each forced buyback adds upward pressure, potentially creating the kind of feedback loop that can drive sharp reversals in crypto markets.

Risk vs. Reward

For active traders, this presents both opportunity and danger. The setup favors a bounce, but geopolitical tensions remain a wild card. Iran's escalating conflict with Israel and the U.S. could easily override technical factors if risk-off sentiment intensifies when traditional markets reopen.

The key level to watch is $64,000. A decisive break above this resistance could trigger covering from overleveraged shorts, while a failure to reclaim it might validate the bears' thesis and send bitcoin toward the $60,000 support zone.