Bitcoin’s price rebounded over 12% this past week, hitting $95,600. However, Glassnode reports a rise in short positions in the perpetual swaps market amid increased Open Interest. The average funding rate has turned negative, indicating bearish sentiment. Despite this, a short squeeze could be on the horizon, as leverage rises even with the price gains.
In the last week, Bitcoin marked a significant price rebound, soaring over 12% and reaching a local high of about $95,600. However, amidst the bullish atmosphere, blockchain analytics firm Glassnode has released some intriguing insights regarding the current state of Bitcoin’s derivative markets, particularly the perpetual swaps that traders are eyeing closely.
Despite the positive price movement, traders in the derivative market are showing signs of caution. According to a recent post shared on X, Glassnode highlighted that Open Interest (OI) in Bitcoin perpetual swaps has surged to 218,000 BTC, reflecting a 15.6% increase since early March. This uptick in open interest suggests that traders are leveraging their positions more, raising the chances of turbulence in the market through potential liquidations.
Under normal circumstances, a rising Open Interest during a price rally would signify confidence among traders. But as per Glassnode’s analysis, the situation appears to be quite the contrary. The short positions look to be gaining traction in the perpetual futures market, with the average funding rate dropping into negative territory at around -0.023%. This negative rate suggests that short traders are compensating long traders since the perpetual contract price is lagging below the actual spot price.
Moreover, the analysis points to a steep decline in the 7-day moving average (7DMA) of long-side funding premiums, now sitting at just $88,000 per hour. This trend reinforces the prevailing sentiment of traders leaning towards short positions as they continue to express bearish views on Bitcoin, despite its recent gains.
Interestingly, Glassnode does note a silver lining. They suggest that the combination of rising leverage and the abundance of shorts could lead to an unexpected short squeeze. This occurs when a sudden price rise forces short-sellers to exit their positions, inadvertently pushing prices higher in the process.
As of the latest updates, Bitcoin is trading at $94,629, which reflects a 1.01% decrease from its peak on April 25. Despite these mixed signals from the futures market, the overall sentiment surrounding Bitcoin remains quite bullish, as evidenced by its 1.02%, 11.12%, and 8.32% gains over the past day, week, and month, respectively. With a market cap reaching $1.88 trillion, Bitcoin continues to hold its position not only as the largest cryptocurrency but also as the fifth-largest asset globally.
