Traders are shorting BTC, potentially triggering a revenge rally

Traders are signaling that they expect the Bitcoin (BTC) rally to end with a shift to short positions. That trading move remains risky, as BTC may respond with more liquidations. 

Bitcoin is trading with a shift to short positions, signaling an end to the recent exuberant rally. Short positions have been dominant and slowly increasing since April 21, recently reaching 53% of open interest. 

BTC still traded at $95,776.31, with over $28B in open interest on the most widely used centralized exchanges. Over $10.6B of those positions are concentrated on Binance, which is becoming the main hub for determining price rallies. 

Derivative traders are still not certain of a bull run

BTC rebuilt leverage in the past few weeks, following a series of significant long liquidations. In the past few months, the generally bullish attitude led to a trading pattern where BTC long bets were dominant and frequently erased in liquidations. In the past week, short liquidations have grown, dominating long liquidations. 

After the shift to short positions, BTC funding rates briefly dipped into negative territory, signaling an end to the overwhelming bullish sentiment. On Binance, the BTCUSDT perpetual futures remained positive, but other exchanges quickly switched to negative funding. At one point, the negative interest rate dipped to -0.023%. 

Negative funding reflects the lowered demand for borrowed funds to defend long positions. The current price action reflects the sentiment of derivative traders, who are still not certain of their bullish stance. 

The shift to short positions also translated into worsening market sentiment. The Bitcoin fear and greed index fell from 72 points to 60 points within hours, indicating the loss of confidence in an ongoing rally.

BTC is also no longer under pressure from the monthly futures expiration event, and may move in erratic ways, mostly tied to leveraged positions. BTC still dominates with 61.4% of the crypto market capitalization, becoming the most notable market mover.

Shorting BTC still takes cautious positions

The buildup of short liquidity remains cautious, and does not try to predict a strict cutoff price for the current rally. 

Since April 21, Hyperliquid has seen only positive funding rates, signaling that the perpetual futures DEX did not see a shift to short trading. As of April 25, Hyperliquid retains a smaller share of short positions, just 48% of all open interest. During previous rallies, Hyperliquid whales were more aggressive, but this time around, there is not enough confidence in an imminent downturn. 

Based on the liquidation heatmap, short positions go all the way up to $98,000, but no price level is clearly dominant. 

Hyperliquid, one of the riskiest platforms for leveraged bets, has seen most high-profile whales closing their positions. 

Long positions on all crypto exchanges indicate a short-term price floor at $92,792, with $80.58M in liquidity. The liquidity may shift if traders choose to close some positions. However, the recent rally sparked hopes of making gains through leveraged shorts.