Possible Bitcoin Short-Squeeze to $90,000 Amid Negative Funding Rates

Recent signs indicate that Bitcoin’s recovery might push its price towards $90,000 as funding rates dip into negative territory.

Bitcoin’s recovery from a substantial drop last week is gaining momentum, with the price recovering to the range of $87,000 to $90,000 after plummeting from $106,000 to $80,600 within ten days.

This rebound has sparked debates on whether Bitcoin has hit a local bottom, despite significant selling from key whale investors.

Key Insights:

Both whale and retail investors continue to be net sellers, while medium-sized holders are accumulating.
Demand from accumulator addresses has recorded a new high of 365,000 BTC, indicating a resurgence of long-term confidence.
Negative funding rates point toward trader capitulation, potentially leading to a short-squeeze.

Bitcoin Distribution vs. Accumulation Trends

According to Onchain data, the market is marked by uneven investor behavior. Wallets holding over 10,000 BTC, as well as those between 1,000 and 10,000 BTC, have been consistent sellers, weakening the market. Meanwhile, retail wallets (those holding less than 10 BTC) have also been net sellers in the past two months, providing limited support.

In contrast, medium-sized holders (10–100 BTC and 100–1,000 BTC) have been buying throughout the downturn, alleviating some of the sell-side pressure. Their activity has come to light as the demand from Bitcoin “accumulator addresses” has surged to 365,000 BTC on November 23, up from 254,000 BTC earlier this month.

The dynamics among these groups could stabilize Bitcoin’s price following the decline, paving the way for a rebound toward $90,000.

Bitcoin accumulation vs distribution Bitcoin accumulation compared to distribution across different cohorts. Source: CryptoQuant

Negative Funding Rates Indicate a Potential Short Squeeze

The futures market significantly influenced the recent decline, where long liquidations, forced selling, and margin calls drove Bitcoin sharply to the $80,000 range. Currently, futures data suggests that exhaustion is setting in among leveraged long positions.

Data from CryptoQuant reveals that traders attempting to go long during the correction have faced significant challenges, with daily funding rates cooling to the point of becoming negative. When Binance’s neutral funding level approaches 0.01%, any drop below indicates a dominance of short positions, as often observed when traders capitulate late in a correction.

Crypto analyst Darkfost indicated that if shorts keep increasing while Bitcoin moves upward, the market might enter a period of ‘disbelief,’ potentially culminating in a significant short squeeze.

Liquidation heatmaps from Hyblock Capital back this scenario, revealing long liquidations amounting to $2.6 billion at $80,000, while short liquidations soared past $8.4 billion near $98,000. Notably, dense liquidity zones at $94,000, $98,000, and $110,000 might become focal points for Bitcoin’s price trajectory.

Liquidation heatmaps Liquidation heatmaps illustrating potential liquidations at various price points. Source: Hyblock Capital

This article does not offer investment advice. Trading involves risks, and readers should conduct thorough research before making any decisions.