Bitcoin short squeeze risk rises as open interest nears $25 billion

11:20

By: Dakir Madiha

Bitcoin short squeeze risk rises as open interest nears $25 billion

Bitcoin is showing conditions often linked to a potential short squeeze, as derivatives positioning becomes increasingly tilted toward bearish bets.

Data from CryptoQuant indicates that Bitcoin open interest climbed to around $24.2 billion, a five week high. At the same time, funding rates dropped to their most negative levels since early February, signaling heavy short positioning across major exchanges.

Negative funding rates mean traders holding short positions are paying a premium to maintain them. This pattern has historically marked periods of extreme pessimism, often followed by sharp upward price reversals.

Open interest rose from $21.87 billion on April 6 to $24.37 billion on April 10 before easing slightly to $24.21 billion on April 11. This represents an increase of more than 11 percent in less than a week. During the same period, about 7,900 BTC were withdrawn from exchanges, suggesting accumulation rather than selling pressure.

According to CryptoQuant contributor CoinNiel, this combination creates a crowded short environment. When prices rise in such conditions, forced liquidations can accelerate gains as traders rush to cover positions.

Market positioning among larger participants points in the opposite direction. Crypto trader Michaël van de Poppe noted that large speculators have shifted to net long exposure, drawing comparisons with setups observed before a major breakout in 2023. Analyst Ali Martinez identified $75,300 as a key liquidity level. A move toward that price could liquidate roughly $80 million in short positions and trigger a cascade effect.

Bitcoin already recorded its largest short liquidation event of 2026 earlier this week, with $52.7 million in bearish futures positions wiped out as prices moved above $73,000.

CryptoQuant data shows funding rates have remained negative throughout March and April, without turning positive. The firm said recent declines do not yet signal meaningful deleveraging, suggesting the potential for further forced liquidations remains.

Global crypto liquidations have stayed below $100 million over 24 hours despite recent price gains, indicating that a full scale squeeze has not yet occurred. Historically, the combination of rising open interest, negative funding rates, and exchange outflows has preceded strong upward moves in Bitcoin.