Bitcoin News Today: Crypto Market's Leverage Reset: Shorts Pay Longs Ahead of Possible Squeeze

Bitcoin's funding rates have hit their lowest levels since the 2022 bear market, signaling a systemic deleveraging across crypto derivatives markets. According to analytics firm Glassnode, this "leverage reset" has wiped out over $1.74 billion in positions over four days, with shorts accounting for the bulk of liquidations as volatility intensifies. The plunge in funding rates-periodic fees exchanged between long and short traders in perpetual futures-reflects a market grappling with excess leverage and shifting sentiment.

The reset follows a volatile week for Bitcoin, which oscillated between $126,200 and $119,700 amid sharp corrections. Glassnode attributed the turbulence to a "flushing out" of speculative excess, a process that typically precedes major price moves. Open interest (OI), a measure of leveraged positions, remains elevated at $90.24 billion, though it has dipped slightly from a peak of $94.12 billion earlier this week. This suggests persistent leverage demand despite the recent selloff, a dynamic that could amplify future swings.

The negative funding rates-reaching as low as -0.0008% on Binance-indicate that short traders are paying longs to hold positions. This contrarian signal often precedes short squeezes, where forced coverings drive prices higher. On-chain analyst Amr Taha noted that such deeply negative rates historically correlate with local market bottoms, pointing to potential capitulation among bearish traders.

Glassnode's Leverage Position Openings and Closures (LPOC) metrics further illuminate the market's positioning. By analyzing price and OI alignment, the tool identifies surges in long closures-often signaling bottoms-as seen in past cycles like the 2022 FTX crash. Conversely, spikes in long openings typically precede tops, reflecting overexuberance. Current data shows a mix of both, with LPOC highlighting synchronized long closures across assets-a hallmark of systemic deleveraging.

The broader context is a crypto market still reeling from the 2022 bear, which saw Bitcoin and Ethereum plummet by 75% and 80%, respectively. Stablecoins like USDT and USDC absorbed massive inflows as investors fled volatile assets, a trend that has since reversed as risk appetite returns. However, lingering fragility persists, particularly in the mining sector, where Bitcoin's realized price-its average cost basis-remains above the current $96,950 level.

Market observers remain split on Bitcoin's near-term trajectory. Analyst Lark Davis argued that the $120,000 level has now held as support after repeated failures to break above it, suggesting a potential rally to $130,000 if bullish momentum sustains. Others caution that elevated open interest and negative funding rates could trigger further volatility, with short squeezes or prolonged consolidation possible depending on liquidity conditions.

As the market digests these dynamics, the coming days will test whether Bitcoin can sustain its recent gains or if another round of deleveraging looms. For now, the interplay between funding rates, open interest, and positioning metrics offers a real-time barometer of a market in flux.

Source: [1] The Bitcoin Market Undergoing a Leverage Reset: Glassnode (https://thecryptobasic.com/2025/10/10/the-bitcoin-market-undergoing-a-leverage-reset-glassnode/)

[2] Inferring Leveraged Positioning from Price and Open ... (https://insights.glassnode.com/leverage-position-openings-and-closures/)

[3] Glassnode: The funding rate in the crypto market has fallen to its ... (https://www.gate.com/news/detail/14697798)

[4] Bitcoin Funding Rates Plunge Into Negative Territory on Binance (https://www.btcc.com/en-US/square/Bitcoinist/287831)

[5] CoinMarketCap + Glassnode: A Challenging Bear Market (https://insights.glassnode.com/gn-cmc-report-1/)