Key Takeaways:
A record $2.6 billion in short positions has piled into Bitcoin as the funding rate turns negative, setting the stage for a potential short squeeze.
Bitcoin bears accumulated $2.6 billion in short positions as BTC slid to $60,000, pushing the funding rate negative and raising the risk of an upside squeeze.
"Short positioning has reached levels that historically precede violent reversals," said Nina Volkov, crypto macro analyst at Edgen. "When funding turns negative at this scale, the path of least resistance shifts upward."
More than $5.3 billion in leveraged long positions have been liquidated across crypto derivatives markets since Monday, with Friday alone accounting for roughly $1.4 billion of the damage as bitcoin plunged below $60,000, according to Coinglass data. The scale of the washout rivals the late January-early February selloff, when bitcoin tumbled from around $90,000 to $60,000 in a matter of a week. Large liquidation cascades often mark periods of capitulation when leverage is flushed out of the system and weaker hands are forced to exit.
The heavy concentration of short leverage creates a mechanical risk: if bitcoin reverses above $63,500, forced buybacks from liquidating shorts could accelerate gains rapidly. Friday's US nonfarm payrolls report will be the next catalyst — a soft print could revive expectations for Federal Reserve cuts under newly confirmed chair Kevin Warsh, push real yields lower and send risk assets higher, taking crypto with it. A hot print does the opposite.
Bitcoin traded at $63,500 as of 14:30 UTC, recovering about $2,000 from its overnight low but still down nearly 3 percent over the past 24 hours. The broader selloff extended across crypto: ether dropped 4.8 percent to $1,696, while Solana fell 5.4 percent to $66.51, taking its seven-day loss to 18.5 percent. Hyperliquid's HYPE, which had been the only top-10 token holding green on a weekly basis, dropped 14.8 percent to $62.14, erasing nearly all of its recent outperformance.
The structural backdrop has not softened. US spot bitcoin ETFs have now logged 13 straight sessions of net outflows totaling roughly $4.4 billion since mid-May. Strategy filed its first disclosed bitcoin sale since 2022 earlier this week, offloading 32 BTC to fund preferred stock dividend obligations. Combined, those two flows have removed a structural bid that supported bitcoin through most of the past 18 months.
The selloff was led from outside crypto. Broadcom's quarterly AI-chip outlook missed elevated expectations on Wednesday, pausing a months-long advance in semiconductor stocks. Nasdaq 100 futures slipped 0.9 percent on Friday, extending the index to a third straight day of declines. South Korea's KOSPI tumbled 4.7 percent, with chipmaker SK Hynix off 8 percent. The coordinated risk-off shift across equities and currencies has pulled crypto squarely into the same macro downdraft.
If the short squeeze materializes, bitcoin's next resistance sits at $68,000, a level that has capped rallies since mid-May. Support remains at $60,000 — a break below that would open the door to $55,000, where the 200-day moving average sits.
This article is for informational purposes only and does not constitute investment advice.
