This morning, $BTC opened around $81,150, then shot straight up to over $86,700, up nearly 7% in just 24 hours. Price hit the highest level in 8 months, and even broke the $85,000 mark that many people had been waiting for for a long time.
This rally wiped out about $648 million in short orders across the entire market. It sounds like a classic short squeeze: the price rises and forces short sellers to buy back to cut their losses, and that buy-to-cover then pushes the price up further, creating a self-reinforcing spiral.
But there is one detail that doesn’t match a pure short-squeeze script. The funding rate of $BTC trading on the perpetual contract is currently only around 0.0044% per 8 hours, almost neutral.
Funding is the fee that the long side pays to the short side (or vice versa) every few hours, so that the perpetual contract price stays close to the spot price. Positive funding means the longs are crowded and paying the shorts; the higher the funding, the “hotter” the derivatives market gets, because leverage is increasing.
After a 7% surge accompanied by liquidations of nearly $650 million, the usual logic is that funding should spike very positive, because leveraged speculators would rush in to chase price as soon as it breaks the level. But here, it doesn’t.
Low funding can mean two things. One is that the buying pushing up the price this time mainly comes from real spot buying, not pure derivatives leverage, so the foundation is sturdier than a purely derivatives-driven pump.
Two is simply that the new long side hasn’t jumped in yet, and funding will gradually rise over the next few hours as FOMO sentiment spreads more. These two scenarios lead to very different outcomes in the next few days.
If it’s scenario one, the price could keep moving higher while funding stays low, because there isn’t much leverage there to “eat itself.” If it’s scenario two, just wait for funding to jump above roughly 0.05% to 0.1% per 8 hours—at that point the risk of a strong upside reversal increases, because then the market is packed with longs paying high fees; even a slight shake could be enough to ignite a reverse liquidation cascade.
The opposite scenario to the argument above also needs to be made clear. It could just be a purely mechanical short squeeze: the old leverage gets wiped out, so funding temporarily looks low, even though the underlying surge is still leverage feeding on leverage—and everything will become clear when the new longs start placing orders in the next 24 to 48 hours.
The most important benchmark to watch right now is the funding rate itself, not the price. You can check it directly on Binance Futures: look at the premium index for the BTCUSDT pair, and update it every 8 hours.
What will prove this viewpoint wrong: if in the next few hours funding spikes very high while the price $BTC v remains steady, with no major sell-off accompanying it, then it means the market is strong enough to absorb a whole new layer of leverage without collapsing. At that point, the funding rate is no longer a reliable early-warning indicator for this rally.
The questions for everyone to answer yourselves in the coming days: if $BTC keeps rising but funding stays low, is that real inflow—or has leverage simply not gotten its turn yet?
Personal observation, not investment advice.
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