Bitcoin Short Squeeze Looms as Funding Rate Drops to -6%

A Bitcoin short squeeze may be forming after perpetual futures funding rates collapsed to -6% on February 28, according to CoinGlass data. The cryptocurrency slid to $63,000 following U.S. and Israeli strikes on Iran but is now attempting to reclaim $64,000, as deeply negative funding and rising open interest create conditions that have previously triggered sharp reversals.

Funding Rates Hit Second Lowest in Three Months

The -6% perpetual futures funding rate marks the second lowest reading in the past three months, according to CoinGlass. The last comparable level occurred on February 6, when bitcoin bottomed near $60,000. Perpetual funding rates are periodic payments between traders in futures markets — when rates turn negative, shorts pay longs. Deeply negative funding signals aggressive bearish positioning, as traders pay a premium to maintain downside bets.

Why Does Rising Open Interest Matter for a Short Squeeze?

Coin-margined open interest rose from 668,000 BTC to 687,000 BTC over the past 24 hours, according to CoinGlass data. Measuring open interest in BTC terms removes distortion from price swings and reveals actual positioning shifts. Rising open interest paired with negative funding means more traders are entering bearish bets, creating crowded short exposure that could unwind rapidly if prices reverse.

Over $500 Million Liquidated in 24 Hours

More than $500 million in crypto positions were liquidated across exchanges in the past 24 hours, according to CoinGlass. Long positions bore the brunt, accounting for over $420 million as bitcoin dropped to the $63,000 level following the U.S. and Israeli military strikes on Iran. The scale of forced selling, combined with deeply negative funding and rising short-heavy open interest, mirrors setups that preceded sharp recoveries in previous cycles.