The October 10 crash that saw Bitcoin (BTC) hit $102,000 has been largely overshadowed by the price correction a week later, but the liquidation chart shows a classic setup that will compress short interest in the market should KingCoin rise above the $111,000 mark again.
Bitcoin fell below $108,000 during U.S. pre-market trading on Tuesday, but has now consolidated around $107,700 after dropping 3.7% in price over the past 24 hours. Traders are trying to figure out what to do about mixed signals, which have sent funding rates plummeting and into territory where short bets are starting to pay out long bets.
Analysts say a cumulative $14 billion worth of short-term leveraged bets are poised to be liquidated if Bitcoin’s bearish trend reverses and the coin rises to a record high of $124,000.
Short squeeze is imminent if BTC revisits $110,000 option
Perpetual futures data shows that funding rates have turned negative, indicating that short positions are starting to pay out long holders again. According to data from Coinglass, open BTC futures interest has fallen by about $20 billion since October 9, when BTC hit an all-time high.
Negative funding rates and declining short-term interest rates indicate imbalances that can amplify sudden price reversals. Traders are now focused on whether Bitcoin can regain the $111,000 level, which analysts believe will trigger the next crash.
BTC futures open interest rate. Source: Coinglass
Other analysts are comparing the current scenario to January 2021, when King Coin soared from $30,000 to over $40,000 within a few days, catching bearish traders by surprise. A squeeze also occurred in the United States in the spring of 2024, with President Donald Trump’s victory sparking a week-long rally that saw Bitcoin rise above $100,000 for the first time in history and millions of dollars in leveraged short sales liquidated.
On-chain analytics firm CryptoQuant’s Bitcoin Composite Market Index (BCMI), which aggregates several market health indicators, has retreated to the 0.5 neutral zone, the midpoint between overvaluation and undervaluation in Bitcoin’s market cycle.
In previous cycles seen in 2020 and early 2024, a retest of the 0.45 to 0.5 range signaled the end of a correction phase and preceded a new expansion leg. As Wumingyu explained, this is a cooling-off period during which speculative activity decreases and long-term value indicators are reset.
Currently, Bitcoin’s MVRV is around 1.8, well below the historical overvaluation level of over 3.0, while the SOPR is close to 1.02, indicating a good balance between profit taking and accumulation.
“All factors point to a structural mid-cycle correction rather than a macro top,” Wu Mingyu said in his analysis. “If BCMI recovers from 0.5 to 0.6, momentum could resume towards new local highs. However, a break below 0.45 could result in a prolonged consolidation.”
The market is in disbelief and doesn’t know what to do
Dirkforst, a market watcher and member of CryptoQuant, believes that the asset may be entering the so-called “stage of distrust”, a psychological stage where the price starts to rise again, but investor confidence is low due to negative price corrections.
Bitcoin funding rates have hovered around -0.004% for six of the past seven days due to sustained bearish positions taken by the market. The prolonged period of negative funds indicates that traders are still leaning short even though the price has stabilized above $107,000.
That said, currency flows show that about 18,000 BTC has flown out of exchanges and about 16,000 BTC has flowed in over the past few days. Moderate net outflows suggest that accumulation is modest, which also means the market is not confident about the fate of BTC prices.
Bitcoin bulls struggled to keep the price above $111,000 in the face of a bearish rally that moved the price to a new resistance level. The $107,000 support zone needs to hold. This is because if the price continues to fall below that level, the scale of selling pressure will shift to the east, potentially prolonging the consolidation phase.
