Bitcoin Braces for Short Squeeze as Open Interest Climbs

Bitcoin is experiencing pressure in the derivatives market. The open interest is up to approximately 272.5K contracts. The rates of funding became almost zero. Price fell below the 95,000, and this is a definite set-up: shorts are accumulating.
There are two results that tend to result out of this behavior. Shorts win and price breaks down. Or spot buyers retaliate and squeeze. At this point of time, there is a bearish sentiment, but the underlying macro story is different.

What the Chart Does Tell Us

Funding declined and traders took new short positions. The market structure exhibits little volatility with significant long liquidations. It is an indication that there is controlled shorting, rather than panic selling. The trading zone, which is between 92k-95k, serves as a battleground. A bounce off this can be a good correction to the overenthusiastic short sellers.

Macro Factors

The world is awash with liquidity. Japan has turned on the stimulus of ¥17 trillion, more than previously expected. China used 800 billion yuan through reverse repos. U.S. terminated its shutdown last week and it plans to pause QT on December 1. Such actions generate risk assets such as Bitcoin. They tend to drive capital into crypto particularly during periods of high derivatives leverage over spot demand.

Short Squeeze Risk is Real

History tells a clear story. At the middle of 2024, a comparable open interest and funding structure resulted in a 15% rally in a week. When spot buyers came in, shorts overstayed and were squeezed out. Should price be above $92K and spot acquisition rises, the Bitcoin may explode to above $100,000 in a brief spurt.

Bitcoin is at a juncture. Bears are building shorts on increasing open interest and depreciating funding. World liquidity is being observed by bulls waiting momentum. When price is operating in the support zone and the funding is negative, then a classic short squeeze may occur. The new directional levels are in the $92K-95K.