Short Sellers Face Squeeze Risk as Bitcoin Consolidates Above $70K Support

Bitcoin price action and futures data are painting a cautionary picture for traders holding short positions above $70,000. The setup suggests that late entries into bearish bets could be walking into a liquidation trap, especially as leverage resets and valuation metrics signal we're near capitulation lows.

The Deleveraging Squeeze

Bitcoin futures open interest tells the story. Researcher Axel Adler Jr tracked weekly changes in aggregate BTC futures OI, which peaked at 8.9% on March 31 when price pushed above $73,000. Fast forward to April 4, and that metric flipped dramatically to -7.2%—the sharpest contraction in the period. By Monday, the seven-day change settled at -2.46%, with total OI sitting near 318,000 BTC.

What matters here: long positions cleared out first, then short sellers stepped in. Price held above $70,000 throughout this deleveraging phase, meaning liquidations didn't cascade into another crash. That's significant for crypto traders evaluating current risk/reward.

The funding rate data backs this thesis. Seven-day average funding rates across Binance, Bybit, and OKX collapsed from 0.33% on March 31 to -0.1738% by April 13. Bybit and OKX show even deeper negatives, signaling a hard tilt toward short positioning. When funding goes negative, sellers are literally paying buyers to hold—creating pressure if demand returns and price stabilizes.

Valuation Metrics Scream Capitulation

Here's where the market intelligence gets interesting. MN Capital Founder Michaël van de Poppe identified three long-term Bitcoin valuation indicators flashing extremes:

The Puell Multiple Z-Score, which benchmarks miner revenue against historical averages, hit its lowest reading in a decade. Similar lows preceded every major bottom since 2018, 2020, and 2022.

The Spent Output Profit Ratio (SOPR) Z-Score—tracking whether coins sell at profit or loss—printed an all-time low. This indicates widespread loss realization and typical exhaustion phase dynamics in crypto markets.

The Market-Value-to-Realized-Value (MVRV) Z-Score also hit record weakness, placing Bitcoin near aggregate cost-basis zones where holders break even.

Translation: most investors have stopped sitting on outsized gains. The euphoric bubble buyers are gone. This type of reset historically follows heavy selling, with short-term traders exiting while longer-term holders accumulate.

The Liquidation Risk

Van de Poppe's assessment cuts through the noise: "For sure, markets can tumble and sweep the lows for liquidity, but I don't think we'll see much more downside in the markets, or at least 90% of the downside is already captured."

Visible liquidity exists between $64,000 and $66,000, but $74,000 remains tested resistance. The risk/reward for new shorts initiated above $70,000 looks increasingly unfavorable. If Bitcoin demand returns—even modestly—late short entries face forced covering. Combined with negative funding rates already pressuring bearish positioning, any bullish catalyst could trigger rapid liquidations.