Bitcoin Shorts Reached August 2024 Levels While Funding Rates Fell Deeply Negative

Following recent liquidations, traders have piled into shorts again, pushing Bitcoin funding rates deeper into negative territory.

Aggregate data on funding rates from the major cryptocurrency exchanges shows that the current wave of shorting is the most extreme since August 2024, a period that coincided with a major bottom for Bitcoin, according to a new analysis from Santiment.

At that point, funding rates fell deep into negative territory as traders overwhelmingly positioned themselves for further downside amid intense fear and bearish sentiment in the market.

Extreme bear bets before the 2024 reversal

Instead of descending further, Santiment found that prices turned sharply, and that the forced reduction of overcrowded short positions helped fuel a strong recovery. After that August 2024 low, Bitcoin rose about 83% over the next four months. This move illustrated how extremely negative financing conditions can arise just before powerful rebounds.

Santiment explained that funding rates are a mechanism within perpetual futures markets, and are designed to keep futures prices in line with spot prices. These fees represent small, periodic payments exchanged between merchants. When funding is negative, short sellers pay long traders, and when funding is positive, long traders pay shorts.

When aggregate funding rates on the exchanges fall well below zero, it means that a large portion of market participants are in a strong position for falling prices, often driven by fear, uncertainty and doubt. Such imbalances can create conditions ripe for sharp counter-moves.

Many short positions are opened using leverage, which means traders borrow capital to increase potential profits. If prices move higher instead of lower, losses on these leveraged short positions can quickly pile up. Once losses exceed predefined thresholds, exchanges automatically liquidate these positions to manage risk.

When large numbers of short positions need to be closed at the same time, the resulting buying wave can accelerate price increases, a trend commonly referred to as a short squeeze. The deeper funding rates fall into negative territory, the more crowded the short positions become and the greater the potential fuel for a sudden reversal.

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Aftermath of the Binance liquidations in October

The analytics platform also pointed to recent market activity surrounding a liquidation event on Binance on October 10, 2025, when a wave of long liquidations contributed to a sharp decline in the price of BTC. In the wake of this move, traders increasingly shifted to short positions as they expected a further downtrend, ultimately creating a similar imbalance that could be observed through the financing rate data.

The current aggregate figures indicate that sentiment has once again swung strongly in one direction. While Santiment stated that heavy short positioning does not guarantee an immediate recovery, the firm described the current environment as one with high risk, where positioning pressure could turn into rapid upside volatility if shorts are forced to retreat.

Based on broader sentiment indicators, it added that these short positions are unlikely to close voluntarily. This makes a liquidation-induced move higher a more likely solution.