A sharp drop in Bitcoin’s price to 61,100 dollars on Friday triggered 335 million dollars in liquidations of leveraged long positions. However, recent market data now suggests that downside pressure may be more limited than before. With a notable buildup of short positions between 63,000 and 66,000 dollars, the risk of a 2.6 billion dollar squeeze looms large if prices rebound significantly.
Short squeezes: The new risk for traders
Based on estimated liquidation data from major exchanges, if Bitcoin drops further from 62,000 to 57,000 dollars, an additional 1.2 billion dollars in leveraged positions could be wiped out. In contrast, if the price surges back to 66,000 dollars, short positions worth up to 2.6 billion dollars could face forced liquidations. This setup points to the possibility of a swift shift in buyer momentum despite weaker demand seen recently.
Net outflows from spot Bitcoin ETFs have also amplified negative pressure on the market. US-listed spot Bitcoin ETFs lost significant capital during an unprecedented 13-day outflow streak. A modest net inflow of 3 million dollars on Thursday provided only a brief respite after a 15-day selling wave, underlining ongoing uncertainty.
Market data shows a move towards 66,000 dollars could squeeze 2.6 billion dollars’ worth of short positions, while a slide to 57,000 dollars would see estimated liquidations capped at 1.2 billion dollars.
Negative funding rate raises eyebrows
The annualized funding rate for Bitcoin perpetual futures has dropped to minus 2 percent, a key indicator closely watched by the market. While a neutral range is typically between 6 and 12 percent, the current negative rate reflects the dominance of short sellers. It also hints at a significant deleveraging by bullish investors, reducing vulnerabilities to sharp selloffs.
Mini glossary: The funding rate is a recurring payment mechanism in perpetual futures markets that maintains balance between long and short positions. A negative rate typically indicates rising demand for shorts.
Nonetheless, analysts caution that if investors with short positions are not using aggressive leverage, any potential short squeeze may be less dramatic. Therefore, not just the size but also the leverage behind these positions will ultimately determine the market’s response.
Tech stocks and liquidity crunches collide
Recently, Bitcoin has underperformed compared to the Nasdaq 100 index, with profit taking in technology stocks also affecting broader market risk sentiment. On Thursday, Broadcom shares slid by 12.6 percent, erasing 280 billion dollars from its market value after the company cut its AI chip sales forecast for the second half of 2026. This move has pushed investors into a more cautious stance overall.
Other major AI-related stocks faced similar selloffs. Micron declined by 7.8 percent, and Arm dropped 4.5 percent. Anticipation around potential IPOs for SpaceX, Anthropic, and OpenAI may be prompting investors to gather cash reserves, leading to liquidity being drawn out from crypto assets and other markets alike.
Jeff Park, a partner at ParaFi Capital and advisor to Bitwise, believes the AI narrative is attracting massive capital flows into tech stocks. According to Park, if this interest wanes over time, funds could migrate back into Bitcoin. Additionally, a resurgence in spot Bitcoin ETF inflows or easing concerns over the sale of 32 BTC by Strategy-related investors might intensify the impact of the current short position buildup and spark sharper price movements.
