Bitcoin price rallied 80% the last time BTC funding rates flipped red

Key takeaways:

• Bitcoin's funding rate briefly turned negative in late June, historically a signal for upcoming rallies.

• A large concentration of short liquidations near $111,320 could fuel a short squeeze.

• BTC has broken out of a bull flag, targeting $117,500, new research suggests.

Bitcoin ( BTC ) future’s perpetual funding rate dipped into negative territory in late June, a period that saw BTC’s spot price rise to around $108,000 from below $100,000.

Such a divergence signals a major price boom ahead for Bitcoin, history may indicate.

BTC bulls could trigger a short squeeze

A negative funding rate means short-position holders are paying long traders to keep their positions open, a sign of bearish market sentiment.

However, a negative funding rate during a general price uptrend often results in an overcrowded short trade vulnerable to a short squeeze .

In the case of Bitcoin, similar funding rate flips in September 2024 and July 2023 preceded 80% and 150% gains, respectively.

BTC funding’s latest recovery into positive territory mirrors those prior setups, suggesting that the bearish reset may have already played out and the market is once again gearing up for a fresh leg higher.

Related: Bitcoin’s STH cost basis suggests $117K is the next stop for BTC price

The $111,320 level on the BTC/USDT pair shows the highest concentration of predicted liquidations in the past three months, with an estimated $520.31 million in leveraged positions at risk, according to CoinGlass data .

Tapping this liquidity could trigger a short squeeze, where forced buybacks from short traders drive prices higher.

Bitcoin targets $117,500 after bull flag breakout

Bitcoin technicals, meanwhile, show a breakout underway above the upper trendline of a bull flag pattern on the daily chart.

Based on the prior flagpole, the pattern’s measured move points to a potential target near $117,500, closely aligning with 10x Research’s head of research, Markus Thielen’s $116,000 forecast for the end of July.