Three data points show synchronized fluctuations, with Bitcoin short pressure mounting; BTC may experience a sharp rebound.

Bitcoin (BTC) continues to experience high volatility in January. Earlier this week, BTC briefly surged to a nearly four-week high before quickly pulling back, with the price temporarily falling below the $90,000 mark. Behind this oscillation, multiple derivatives and on-chain indicators simultaneously signal a noteworthy development: the market is building conditions for a potential Bitcoin short squeeze.

From the derivatives market perspective, the first point to note is the change in funding rates. Analyst Burak Kesmeci pointed out that the funding rate for mainstream CEX BTC perpetual contracts has turned negative on a daily basis, marking the first time since late November 2025. The current funding rate is approximately -0.002, significantly lower than previous levels, indicating that short sellers are in control. Historical data shows that after the last time the funding rate turned negative, Bitcoin rebounded from $86,000 to the $93,000 range. When the funding rate remains negative but prices do not break down significantly, it often suggests that short positions are becoming fragile.

The second key signal comes from open interest (OI). Recently, while BTC prices have fallen, the open interest in futures markets has continued to rise. This “price decline + increasing OI” combination typically indicates that new short positions are being accumulated rather than longs exiting. When prices rebound, this crowded short structure can easily trigger a wave of forced liquidations, amplifying the upward move and creating a classic short squeeze scenario.

The third risk factor relates to leverage levels. According to CryptoQuant data, Bitcoin’s estimated leverage ratio has risen to a nearly one-month high. In a high-leverage environment, even a small rebound can trigger chain liquidations, forcing shorts to buy BTC passively and further pushing up the price. This structural risk is particularly evident in the derivatives market.

Overall, the coexistence of negative funding rates, rising open interest, and high leverage is constructing a market environment unfavorable to shorts. If spot demand recovers or macro-level positive catalysts emerge, a rapid short-term rally in Bitcoin would not be surprising. Of course, without clear driving factors, a short squeeze could be delayed, but the current risk balance in the BTC market is gradually tilting in favor of the bulls.