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“The risk of ‘short squeeze’ in Bitcoin has increased,” says K33: We may see sharp movements

Crypto research company K33 Research wrote that while funding rates are at negative levels, open positions have increased sharply, creating a suitable ground for short squeezes.

According to crypto research company K33 Research, there are signs in the derivatives market that the risk of a short squeeze that could trigger sharp rallies in Bitcoin is increasing.

The company, which tracks the funding rates of Bitcoin-based futures contracts, noted that the seven-day average annualized funding rate is at its lowest level since March 2023, when bank failures in the US shook the market. According to Bloomberg, in a note published by company analysts Vetle Lunde and David Zimmerman, they commented, “While funding rates have been at negative levels on average over the past week, open interest has increased sharply. This situation indicates aggressive short selling and structurally suitable ground for a ‘short squeeze’.”

Stating that the size of open interest increased by the equivalent of 29 thousand BTC last week and the average funding rate was minus 2.5 percent yesterday, the analysts said, “It is relatively rare for open interest to increase so rapidly in addition to a negative funding rate.”

A short squeeze refers to investors who are short in an asset in financial markets, who make hasty purchases to reduce their losses as a result of a rapid increase in the price of that asset. This situation caused the price of the asset to increase even more.

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