Bitcoin derivatives traders are increasingly positioning themselves for a further downtrend rather than a clean rebound, as the leading cryptocurrency continues to trade within a tight range below $70,000.
According to Crypto Slates According to data, BTC price hit a low of $65,092 in the last 24 hours, but has since recovered to $66,947 at the time of writing. This continues a week of tight trading that has not yielded any momentum for the major cryptocurrency.
That vulnerability is most evident in derivatives, where traders are increasingly turning to short positions to take advantage of further weakness rather than a clean recovery.
This setup creates a well-known tension in the crypto markets. Crowded shorts can provide the fuel for a sudden surge, but a market shaped by recent liquidation trauma and shaky spot demand can also remain stuck in defensive mode for longer than contrarian traders expect.
Funding shows busy downside trading
Santiment’s financing rate metricwhich aggregates major exchanges has entered negative territory, indicating that shorts are paying longs to keep their positions open.
The crypto analytics firm described the decline as the most extreme wave of shorting since August 2024, a period that coincided with a major bottom and a sharp multi-month recovery.
Funding rates exist because perpetual futures do not expire. Exchanges use periodic financing payments to keep perpetual prices in line with spot prices.
When funding is positive, leveraged longs pay shorts. When it is negative, shorts pay out longs. Deeply negative financing generally indicates one-sided trading; the crowd pays to stay short, often with leverage.
That creates a pinch risk, even with an otherwise weak tape. If spot prices rise, even modestly, losses on leveraged short positions could force buybacks. These buybacks can increase prices, creating additional forced coverage.
However, negative financing does not guarantee a rally. It’s a measure of how much positioning is leaning, not a measure of the amount of spot demand waiting on the sidelines.
At the start of 2026, several signals still appeared defensive, which helps explain why bearish financing may persist.
The “10/10” crash of October still determines risk appetite
The reason the short trade has traction is rooted in the trauma of the historic October 2025 deleveraging event, abbreviated to event traders as “10/10.”
CryptoSlate previously reported that more than $19 billion in crypto leverage was liquidated in about 24 hours on that day.
The episode was triggered by a macro shock (headline news about trade war tariffs) that hit already busy positioning and then collided with a disappearing order book.
That context is important because it helps explain why extremely negative financing can persist longer than contrarians expect.
After repeated liquidation cascades, many traders view rallies as opportunities to hedge, reduce exposure, or engage shorts.
In that environment, bearish positioning can become a default stance, rather than a tactical trade that quickly reverses.
Glassnode’s latest weekly framing captures the push-and-pull. The company described Bitcoin as absorbed within a “demand corridor” of $60,000 to $72,000, a range in which buyers have repeatedly intervened.
However, it also signaled that overhead supply could lead to a drag on aid increases, pointing to large supply clusters with unrealized losses around $82,000 to $97,000 and $100,000 to $117,000.
Together, these levels paint a map for traders: There is room for tightness in the corridor, but there are also clear zones where previous buyers may be looking for strong sales.
The pricing of options shows that fear is being paid for
Derivatives markets that go beyond financing reinforce caution.
Deribit’s weekly market report showed BTC funding fell to its most negative level since April 2024 and short-dated futures traded at strong spot prices, a pattern consistent with bearish demand for leverage.
The same report noted that demand for downside hedging soared, with 7-day BTC volatility exceeding 100%.
Furthermore, BTC Options pricing showed that fear was being priced and not just discussed.
According to the report, the volatility smile was the largest premium for puts since November 2022, indicating traders were willing to pay a premium for crash protection even after a recovery.
When puts become this expensive, it usually reflects two things at once: fear of sharp downside moves, and skepticism that dips will be orderly.
Spot ETF flows offer a second, less technical view of sentiment, and they appear mixed rather than convincingly supportive.
The SoSo Value daily spot Bitcoin ETF table showed outflows returning during key sessions this week, including net outflows of about $276.3 million on Feb. 11 and about $410.2 million on Feb. 12, with multiple funds reporting negative returns.
These numbers matter because the ETF wrapper has become a central transmission mechanism between traditional portfolios and Bitcoin exposure. When it bleeds, it can weaken the spot bid even as offshore markets trade actively.
Essentially, the message is clear that BTC selling pressure is not easing, and a stable bid for the top crypto coins has not proven itself again.
In that gap, bearish derivative positioning may remain dominant, and short squeezes may occur without a sustained uptrend.
Three paths from here: pinch, grind or snap
In light of the above, BTC’s next move could depend less on a single funding footprint and more on whether the market shifts from liquidation-induced repositioning to stabilization.
Against that backdrop, traders are formulating the next phase in three broad scenarios.
The first is a squeeze rally that meets resistance from above.
In this scenario, the positioning is too one-sided and deeply negative financing becomes fuel. If spot demand improves, Bitcoin could retest the top of the $60,000-$72,000 corridor and approach $79,200, the True Market Mean identified by Glassnode.
Next would be the main test above that, with Glassnode’s overhead supply clusters falling within the $82,000 to $97,000 range. The story in that case is not a clean return to a new bull market; it’s a reflexive rally in a region full of potential sellers.
The second is a shift in the range consistent with the view that risk sentiment has not yet fully recovered.
In this situation, the funding rate remains volatile but drifts towards neutrality as open interest and leverage remain subdued after repeated washes.
In that world, short crowding can still lead to higher breakouts, but inconsistent spot flows and continued demand for hedging keep rallies from turning into trends.
The third is a structural break from BTC’s current levels.
If the $60,000 to $72,000 corridor fails definitively, valuation gravity will shift toward the Glassnode-highlighted price anchor of roughly $55,000, especially if macro risks flare up again while option prices remain elevated.
Meanwhile, macro remains the lid on all three paths. With the Federal Reserve keeping interest rates at 3.5% to 3.75% and explicitly signaling increased uncertainty, crypto’s sensitivity to broader risk conditions remains high.
That’s one reason why this has become a high-convexity regime, where crowded shorts can cause sudden upside volatility, while defensive hedging and fragile liquidity can still send prices falling in bursts.
For now, the overriding theme is clear: Traders are increasingly better positioned to profit from downside moves, and the market is volatile enough to quickly punish or reward them.