For a short squeeze to occur, the market needs to have a higher-than-usual bearish activity.
Open interest, or the number of open positions in bitcoin’s perpetual futures market, rose to 256,752 BTC early this week, the second-highest daily tally in 365 days, surpassed.
Most of these could be short positions, as data tracked by Laevitas shows the funding rate – the cost of holding long/short perpetual futures positions – has been consistently neutral to negative in recent weeks.
So, now if bitcoin turns higher, the cost of holding shorts will become a burden for traders holding bearish positions.
“The sentiment, funding rates and futures basis suggest that shorts are the most confident.
So, perpetual futures positions can be held indefinitely without the need to square off or roll over positions ahead of the expiration date.
Open interest as a standalone indicator reveals only the amount of fiat money locked in the derivatives market.
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