Funding Metrics Point to a Local Bottom, Raising the Risk of a Bitcoin Short Squeeze Past $87K.

Bitcoin BTC is approaching a key price zone that could put significant pressure on bearish traders, with derivatives indicators pointing to the early stages of a potential short squeeze and a possible local market bottom.

Data from Coinglass shows that a cluster of large short positions—many likely opened on Binance during last week’s steep decline—are vulnerable to liquidation near $87,000. If Bitcoin pushes above that level, those shorts may be forcibly closed, effectively turning into buy orders and accelerating upward momentum in a textbook short squeeze.

Additional market signals reinforce this setup. The global average funding rate has slipped to -0.006%, meaning short sellers are now paying long traders to maintain positions. Glassnode notes that this type of negative flip often corresponds with phases of seller fatigue and has historically coincided with local bottoms when sustained.

Leverage has also been flushed out of the system. Open interest, which surged to around 752,000 BTC on Nov. 21 as Bitcoin hit lows near $80,000, has now dropped sharply to roughly 683,000 BTC. That’s below the 741,000 BTC recorded on Oct. 10—right before the broader liquidation cascade hit the market.

Together, rising pressure on shorts, cleaner market leverage, and improving spot prices suggest the groundwork for continued recovery is forming, assuming external macro conditions remain stable.