Analyst flags Bitcoin derivatives leverage decline and rising funding costs as potential triggers for a long squeeze if price falls below $77,000.
DeFi & Yields ·
Bitcoin's derivatives market has contracted, with open interest down nearly 4% since August 21, while funding costs paid by holders of leveraged long positions have risen. An analyst has identified these two shifts as potential precursors to forced liquidations, noting that the scenario becomes acute if traders re-establish leveraged exposure while Bitcoin's price falls below key thresholds.
The mechanics hinge on price levels and trader behavior. Bitcoin holding above $79,700 could prevent further deterioration, but a breach below $77,000 would likely trigger cascading liquidations as elevated funding rates force margin calls. The risk materializes only if leverage rebuilds amid bullish conviction—a combination that would leave the market exposed to sharp reversals.
What remains unclear is whether leverage will actually accumulate again or whether funding cost increases will deter new long positions. The analyst's framework assumes a specific sequence of events; current data confirms the rising costs and reduced open interest but does not yet signal renewed trader appetite for leveraged bets.