Bitcoin, the world's largest cryptocurrency, could be gearing up for a substantial price surge in the near future according to new data analysis from blockchain analytics platform Santiment. Their report highlights a key factor that suggests Bitcoin is primed for a potential 'short squeeze' that could ignite explosive upside momentum and propel prices well above the $30,000 level.
Santiment's findings center around a remarkable increase in short positions on Bitcoin futures contracts this past week, predominantly on the Deribit and Binance cryptocurrency exchanges. This buildup of short interest has coincided with a modest 4% uptick in Bitcoin's price over the same timeframe, fueling speculation that a short squeeze scenario could be unfolding.
A short squeeze occurs when short sellers who have bet against an asset are forced to buy back their positions as the price rises, triggering even more buying activity. With Bitcoin futures positioning looking increasingly bearish in contrast to the coin's gently rising price action, analysts wonder if the ingredients are coming together for a violent upside breakout.
Funding Rates Signal Persistent Bullish Sentiment
Despite the ballooning short positions, Bitcoin's overall futures funding rates have remained solidly positive over the past week. According to data from Coinglass, Bitcoin's current funding rate sits around 0.0036% - indicating that the majority of futures traders are still betting on a price increase even amidst heightened short selling activity.
However, long positions have faced greater risk of liquidation recently due to Bitcoin's small pullback over the past month. On September 20th, BTC long liquidations totaled over $16 million compared to just $6.7 million in short liquidations. As of September 22nd, long liquidations have moderated to $7 million while shorts have declined to less than $200,000 - evidence of the market rebalancing.
Deribit And Binance Funding Rates Also Positive
Drilling down into the specific exchanges where short interest has spiked, their futures funding rates also remain positive. This suggests traders on these platforms have not capitulated on their bullish outlook despite piling into short trades. With their positioning looking increasingly skewed to the short side, these traders could get caught wrong-footed if Bitcoin stages an upward breakout - forcing them to cover their shorts.