Derivatives data is signaling growing pressure on bearish traders, with falling open interest and a stabilizing price rebound pointing to early signs of a potential short squeeze.

Bitcoin BTC is hovering near a critical price zone that threatens a cluster of large short positions—creating conditions that could force a rapid move higher. According to Coinglass, many of these bearish bets, likely opened on Binance during last week’s market turmoil, face liquidation around $87,000. A move above that level could trigger forced closing of shorts, adding buying pressure and fueling a classic short squeeze.

Funding rates also support the case for a local bottom. The global average funding rate has flipped to -0.006%, meaning shorts are now paying longs to keep positions open—signaling a shift toward bearish overcrowding. Glassnode notes that negative funding, when sustained, often reflects seller exhaustion and has historically aligned with local market floors.

Meanwhile, leverage has meaningfully reset. Open interest surged to roughly 752,000 BTC on Nov. 21 as prices hit the $80,000 lows, but has since fallen sharply to about 683,000 BTC—well below the 741,000 BTC level seen on Oct. 10, just before the major liquidation wave.

With funding turning negative, leverage flushing out, and price recovering, market structure appears increasingly supportive of further upside—provided broader macro conditions do not deteriorate.