As Bitcoin approaches $76,000, investors are divided over its immediate future due to persistently negative funding rates in the derivatives market. These rates, which reflect fees paid by traders to align spot and futures prices, have remained unfavorable for over a month, reaching their highest point this year according to Coinglass data.
Negative funding rates suggest that many traders are betting against Bitcoin’s recent rise, anticipating a downturn. This situation creates the possibility of either a short squeeze or a bull trap, depending on which market forces prevail first.
“The extent of negative funding rates indicates significant short selling in the market,” said Daniel Reis-Faria, CEO of ZeroStack, speaking to Decrypt.
This derivatives data stands in contrast with Bitcoin’s recent surge, driven by factors such as continuous ETF inflows, developments related to the CLARITY Act, and a temporary de-escalation between the U.S. and Iran, Decrypt reported earlier.
For a short squeeze to gain traction, Bitcoin would need to surpass and maintain above $80,000,” Illia Otychenko of CEX.IO told Decrypt. “Such a move could trigger widespread liquidations of short positions, boosting the rally further,” he added.
Reis-Faria predicts that Bitcoin might approach $125,000 within 30 to 60 days, supported by a potential short squeeze.
Currently, Bitcoin is priced at approximately $75,580, up 1.2% over the past day after touching an intraday peak of $76,114, as per CoinGecko data.
However, a short squeeze isn’t certain to occur. Options data shows that the 7- and 30-day 25-delta skew is between -2% and -4%, according to Deribit, indicating a premium on downside protection through bearish positions. The 0.72 put/call ratio is also rising, signaling increased demand for such protection. “This pattern mirrors late May 2022 when similar conditions led to a significant sell-off,” Otychenko noted.
Despite positive factors like ETF inflows and geopolitical easing, there’s a real possibility that the current setup could result in a bull trap rather than a breakout,” he warned.
Analysts interviewed by Decrypt echoed this sentiment, emphasizing that while geopolitical tensions have paused, they haven’t disappeared. A renewed conflict between the U.S. and Iran could drive oil prices up, reigniting inflation fears and dampening risk appetite for Bitcoin and other financial assets.
On Myriad, a prediction market owned by Decrypt’s parent company Dastan, users are increasingly optimistic about Bitcoin’s trajectory, assigning a 67% probability to its next move reaching $84,000 as opposed to $55,000, up from 54% earlier in the week. Similarly, there is a 66% chance attributed to more than 15 ships passing through the Strait of Hormuz before May, rising from 49% on Monday.