I found this Bitcoin situation interesting these days. The funding rate for perpetual contracts dropped to -6%, one of the worst levels in three months, which basically means that a lot of people are betting on the decline and paying a premium for it. It’s a very strong sign of pessimism in the market.

What stands out the most is that even with this price drop that reached around 63 thousand, open interest rose a lot, going from 668 thousand BTC to 687 thousand BTC. Like, people are increasing their bets even with the volatility. In the last 24 hours, more than 500 million in positions were liquidated, and 420 million of that came from traders who were long.

Now Bitcoin is trying to recover the 64 thousand level, and with such a negative funding rate, many analysts are talking about a possible short squeeze. Basically, if the price rises quickly, all those shorts could be forced to cover their positions, which would create even more buying pressure. It’s that scenario where extreme pessimism can flip things around.

Keeping an eye on how this develops. With the geopolitical situation also influencing things, it’s hard to predict, but these negative funding rates usually signal that the market is at an extreme.