Short selling accumulated as much as during FTX's bankruptcy…Will Bitcoin experience an unprecedented short squeeze?

▲ Bitcoin (BTC) / ChatGPT-generated image ©

While Bitcoin (BTC) has entered a period of consolidation under short-term downward pressure, an analysis suggests that the massive short positions accumulated in the derivatives market could instead trigger an explosive short squeeze (buying pressure generated to close or cover short positions), serving as a catalyst for a surge towards $85,000.

According to investment media FXStreet on April 20 (local time), the total market capitalization of virtual assets slightly decreased by 0.81% compared to the previous day to $2.53 trillion but maintained a solid trend with a 5% increase on a weekly basis. Bitcoin, the market leader, hit a high of $78,000 last week but then fell below the $75,000 mark due to geopolitical concerns related to Iran, which dampened investor sentiment along with the stock market. However, experts assess this not as a trend reversal but as a healthy correction within a bull market.

The atmosphere in the spot market remains hot. According to SosoValue data, US Bitcoin spot ETFs saw a net inflow of $996.4 million, and Ethereum spot ETFs also attracted $275.8 million in funds weekly, demonstrating strong demand from institutional investors.

However, the atmosphere in the derivatives market is quite the opposite. According to Bloomberg, the perpetual futures funding rate has remained negative for an astonishing 46 consecutive days. This is an unprecedented level of pessimism, last seen immediately after the collapse of FTX in late 2022, indicating that despite the strong rebound in the spot market, derivatives traders still distrust the bullish trend and are actively building short positions.

Regarding this extreme divergence, K33 Research analyzed that it could instead be the fuse for a bull market. If upward momentum is maintained while an excessive amount of short selling is accumulated, a short squeeze could occur, causing prices to skyrocket uncontrollably. Kaiko also predicted that if Bitcoin strongly breaks the $76,000 resistance level, it could rally to $85,000 in one go.

Meanwhile, according to DeGenMAC, miners secured liquidity by selling 32,000 BTC in the first quarter alone, surpassing the entire sales volume for 2025, amidst historically low hashrates. Consequently, Bitcoin mining difficulty was adjusted down by 2.43% to 135.59 T, and the network hashrate, which had fallen earlier this month, is now recovering, helping to stabilize the mining ecosystem.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*