Potential for Bitcoin Short-Squeeze to $90,000 as Funding Rates Drop
Recent Bitcoin funding rates have turned negative, indicating a possible short-squeeze that could drive the price back to $90,000 or more.
Bitcoin’s recovery from a recent downturn continues, stabilizing between $87,000 and $90,000 after plummeting from $106,000 to $80,600 in a mere 10 days. This rebound has sparked debates on whether Bitcoin has found its local bottom, despite significant sell-offs from major investors.
Key points:
- Despite being net sellers, Bitcoin whales and retail investors see mid-sized holders accumulating.
- Demand from accumulator wallets hit a record high of 365,000 BTC, showcasing renewed long-term confidence.
- The recent negative funding rates indicate a shift towards trader capitulation, boosting the chances of a short squeeze.
Bitcoin Distribution Versus Accumulation Trends
Onchain data reveals varied behaviors across investor classes. Large wallets (10,000+ BTC) and institutional holders (1,000-10,000 BTC) have predominantly sold during this correction, aggravating market weakness. Contrarily, smaller retail wallets, those with under 10 BTC, have also been net sellers for 60 days, providing minimal support.
Bitcoin accumulation vs. distribution by all cohorts. Source: CryptoQuant
In comparison, mid-sized holders (10-100 BTC and 100-1,000 BTC) have shown active accumulation throughout this downturn, helping to mitigate selling pressure. The increase in demand from Bitcoin accumulator addresses points to a significant rise in confidence.
Bitcoin demand from accumulator addresses. Source: CryptoQuant
Related: Over 8% of Bitcoin changed hands in the past week, with analysts cautioning the market remains on a knife’s edge.
Insights on Funding Rates and Potential Short Squeeze
The futures market significantly influenced Bitcoin’s decline, with long liquidations and forced selling pushing prices down. However, current data suggests that leveraged long positions are beginning to experience exhaustion.
Reports indicate those who entered long positions during the dip have been squeezed out, as daily funding rates became notably negative. This shift suggests a dominant short interest among traders, often seen when they capitulate after a downward correction.
Analyst Darkfost warned that if short positions keep increasing while Bitcoin’s value attempts to rise, the market may enter a “disbelief phase,” setting the stage for a substantial short squeeze.
Liquidation heatmap analyses support this notion, with long liquidations totaling $2.6 billion at $80,000 and short liquidations exceeding $8.4 billion around $98,000. The presence of significant liquidity levels at $94,000, $98,000, and $110,000 could attract Bitcoin prices.
Liquidation heatmaps. Source: Hyblock Capital
Related: High percentage of Bitcoin, ETH, SOL held at a loss: Is it a bear market sign?
Disclaimer: This article does not provide any investment guidelines. All investment carries risk, and readers should analyze their decisions carefully.
