Bitcoin surpassed $77,000 this week, but there’s something strange happening in the derivatives that makes me uneasy. The funding rates for perpetual futures remain negative for over a month, which means leveraged traders are still paying to hold short positions even as the price gradually rises. This is a significant disconnect between what’s happening in the spot market and what derivatives traders are doing.

Bitcoin has risen about 14% since April’s lows, helped by steady inflows into American ETFs and aggressive buying by MicroStrategy, which moved $2.6 billion in two weeks. Just this week, US-listed Bitcoin ETFs pulled in over $800 million. When you see this kind of divergence between price and positioning, it usually doesn’t last long. Traders betting against Bitcoin are accumulating losses and may be forced to buy back quickly at some point, creating that violent upward move that people call a short squeeze.

Vetle Lunde, a researcher at K33, said traders are building short positions and betting against a breakout, which sets everything up for a short squeeze if the rally continues. The current structure looks exactly like a typical setup. The uncovered sellers still dominate leverage but are in the red, vulnerable. And spot liquidity is thin, so any sharp move spreads quickly through the derivatives and turns into a cascading squeeze.

The market is receiving a wave of bullish catalysts at the same time. Charles Schwab announced plans to launch crypto trading this year and suggested clients could allocate up to 8.8% of their portfolios in Bitcoin. Each ETF purchase pushes the price higher and makes it more expensive for uncovered sellers to hold losing positions, increasing the pressure that has been quietly building in the derivatives.

Deribit options data show markets paying more for downside protection, with open interest concentrated in puts at the 60K and 50K levels. Laurens Fraussen, an analyst at Kaiko, believes Bitcoin could experience a rally that surprises some people. If it breaks above 2.6B, it could extend toward 800M. But bearish traders might still be ahead if this recovery ends up breaking down. Meanwhile, the short squeeze becomes more likely the longer this stalemate drags on.