I noticed something interesting happening in the Bitcoin market in recent days. The funding rates for perpetual futures dropped to -6%, the second most negative level in three months. The last time we saw such negativity was in February, when BTC approached $60,000. This is a very specific signal of what’s going on with traders.

When the funding becomes deeply negative like this, it means that shorts are paying a premium to maintain their downward positions. It’s basically the perfect scenario for a short squeeze to occur—when these short traders are forced to cover their positions and buy back, creating rapid buying pressure. And look: the open interest in BTC increased from 668,000 to 687,000 BTC in the last 24 hours, signaling more traders entering these bearish bets.

But here’s the interesting part: over $500 million in positions were liquidated yesterday, with $420 million of those being longs. This shows the scale of forced selling as prices fall. Bitcoin is trying to recover the $64,000 level after briefly dropping to $63,000 following geopolitical events. Basically, we have a situation where many are positioned for a decline, but there’s a real possibility of a short squeeze if the price turns around.

What I find interesting is that despite the drop, open interest increased. This suggests traders are becoming more confident in their short positions, but it also means there’s a lot of fuel for a reversal if sentiment shifts. This is exactly the kind of setup that can generate aggressive moves in either direction.