After a poor performance throughout the week, Bitcoin’s price experienced a fair amount of bullish momentum on Friday, February 13. Going into the weekend, the major cryptocurrency appeared on track to regain the psychologically relevant $70,000 level. Interestingly, recent on-chain data shows that this latest bullish spurt could be the start of, at the very least, a short-term rally for the Bitcoin price.
Is Bitcoin About to Have a Short Squeeze?
In a Quicktake post on the CryptoQuant platform, market analyst CryptoOnchain says revealed that the Bitcoin Funding Rate on Binance, the world’s largest cryptocurrency exchange by trading volume, has fallen to a critically low level – a level not seen in more than a year. The relevant indicator here is the 14-day Simple Moving Average (SMA-14) of the BTC funding rate.
Normally, the Funding Rate metric estimates the periodic fee that traders in a derivatives market pay for a particular cryptocurrency (in this case Bitcoin). When the financing interest rate is positive, this usually means that long traders (investors with buy positions) pay a fee to short traders (investors with sell positions) in the derivatives market.
On the other hand, a negative funding rate, as is currently the case, suggests that payment is going from the short traders to the long traders. Data from CryptoQuant shows that the 14-day SMA of the Bitcoin Funding Rate on Binance has fallen to -0.002, the lowest level since September 2024.
As CryptoOnchain rightly pointed out, a deeply negative funding rate, especially one that lasts more than 14 days on average, indicates that bears (short traders) are increasingly betting on the major cryptocurrency. The market analyst noted that these extremely negative readings often correlate with the bottom of severe downtrends.
CryptoOnchain wrote in the post:
From the perspective of chain and market psychology, deeply negative financing rates often serve as a strong contrarian signal. The market currently appears to be heavily “overcrowded” on the short side.
From a historical perspective, this trend in the chain has often paved the way for a powerful short squeeze, where a small price rebound could trigger a cascade of liquidations of the accumulating short positions. This cascade of short liquidations often serves as jet fuel, further pushing the Bitcoin price higher.
Bitcoin price at a glance
At the time of writing, Bitcoin’s price stands at around $69,000, reflecting an increase of more than 5% in the past 24 hours.