BTC funding rate drops to -6%, raising short squeeze risk

The annualized funding rate for Bitcoin (BTC) perpetual futures has dropped to -6%, its lowest level in three months, CoinDesk reported, citing data from CoinGlass. This is a similar level to that seen on Feb. 6, when Bitcoin's price fell to $60,000. A negative funding rate indicates an excessive concentration of bearish bets, as it requires traders with short positions to pay those with long positions. During the same period, coin-margined open interest (OI) increased from 668,000 BTC to 687,000 BTC, showing expanded participation in the derivatives market despite price volatility. Furthermore, total crypto market liquidations over the past 24 hours exceeded $500 million, with long positions accounting for the majority at approximately $420 million. Market analysts suggest that if short positions become overcrowded, a price rebound could trigger a large-scale liquidation of shorts, a scenario known as a short squeeze.