Bitcoin’s latest value decline has led to many merchants betting on further downside, with on-chain knowledge displaying a notable improve in bearish positioning throughout main crypto exchanges. Based on on-chain knowledge from Santiment, aggregated funding charges have fallen into deep detrimental territory.
This stage of deep brief positioning has not been seen with Bitcoin since August 2024, a interval that finally established a serious backside earlier than a robust multi-month restoration. Bitcoin merchants are actually again to this stage, and historical past reveals that such excessive positioning can create the conditions for a rally.
Funding Charges Present Bearish Positioning For Bitcoin
Santiment’s “Funding Charges Aggregated By Trade” metric blends funding data from a number of main exchanges to offer a great view of market sentiment and positioning strain throughout the crypto trade.
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Funding charges are a mechanism utilized in perpetual futures markets the place merchants pay small charges to 1 one other at common intervals to maintain contract costs aligned with spot costs. When funding charges are detrimental, brief sellers are paying lengthy merchants. When they’re optimistic, longs are paying shorts.
The most recent chart knowledge from Santiment reveals funding charges are actually in detrimental territory, with pink bars dominating the decrease part of the chart. Funding charges are actually lower than -0.01%, which reveals that a good portion of derivatives merchants are positioned for draw back.
Most of the time, funding rates are positive, as proven within the chart under. Based on Santiment, the final time derivatives funding reached equally excessive detrimental ranges was in August 2024.
At the moment, merchants have been shorting Bitcoin aggressively after a notable value crash. Nonetheless, as a substitute of constant decrease, the Bitcoin value motion reversed sharply. Brief liquidations helped contribute to an roughly 83% rally over the next 4 months as positions have been pressured to shut.
An analogous setup occurred after Binance’s main liquidation occasion on October 10, 2025, when billions of {dollars} in lengthy positions have been worn out. Within the aftermath, merchants turned sharply bearish and crowded into brief positions.
Excessive Shorting Can Lead To A Squeeze
Excessive detrimental funding is a mirrored image of fear-based positioning. All that should occur for a brief squeeze is for the Bitcoin value to push only a bit increased.
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If the worth unexpectedly strikes increased, leveraged shorts begin accumulating losses at a fast pace. As soon as these losses cross liquidation thresholds, exchanges routinely shut these positions. Merchants should purchase again Bitcoin to cowl their positions, and this, in flip, creates upward strain on the worth.
On the time of writing, Bitcoin is buying and selling at $68,740, however the short-term cost basis is round $90,900. A robust push and shut above $75,000 may result in bullish momentum and attract contemporary inflows, growing the probabilities of a brief squeeze. Nonetheless, heavy shorting alone does not guarantee an immediate rebound, although it does create a fragile surroundings the place positioning strain can rapidly change to sharp upside volatility.
Featured picture from Getty Photos, chart from Tradingview.com
