Bitcoin eyes a possible short squeeze as funding rates tumble to a three-month low.

Bitcoin is attempting to push back toward the $64,000 mark, with derivatives data pointing to the potential for a short squeeze after prices briefly slid to around $63,000 amid U.S. and Israeli strikes on Iran.

Funding rates in the perpetual futures market have turned sharply negative. Data from CoinGlass show funding falling to roughly -6%, the second-lowest reading in the past three months. The previous instance of similarly negative funding occurred on Feb. 6, when bitcoin carved out a bottom near $60,000.

Perpetual funding rates are the recurring payments exchanged between traders in perpetual futures contracts. When funding is positive, long-position holders pay shorts. When it flips negative, short sellers pay those holding long positions.

Sustained negative funding typically reflects heavy short exposure and deeply bearish sentiment, as traders are effectively paying a premium to maintain downside bets.

At the same time, coin-margined open interest climbed from 668,000 BTC to 687,000 BTC over the past day. Tracking open interest in bitcoin terms helps eliminate distortions caused by price volatility. The combination of rising open interest and negative funding suggests growing participation, with a larger share of traders leaning short.

Liquidation data further underscores the intensity of derivatives activity. More than $500 million worth of crypto positions were wiped out over the past 24 hours, according to CoinGlass. Long positions accounted for over $420 million of that total, highlighting the scale of forced selling as prices declined.

Together, the sharp drop in funding, expanding open interest and heavy long liquidations point to crowded positioning — a setup that can amplify volatility and potentially fuel a squeeze higher if prices begin to rebound.