Bitcoin price shorts build as U.S. Fed cut bets rise and liquidation risks grow

Bitcoin short positions have climbed as the market trades in a narrow band before a possible Fed rate cut, leaving more than $6.5 billion in leveraged futures positions at risk of liquidation if the price strays just a few percentage points from current levels.

With the Federal Reserve’s policy announcement less than a week away, traders are crowding into directional bets on Bitcoin while the spot market stalls. Derivatives analytics from CoinGlass show that about $3 billion in short positions would be wiped out if Bitcoin rises roughly 3% to $96,250, while around $3.52 billion in long positions would be liquidated if the price falls 4.54% to $89,209.

At the time of writing, Bitcoin is changing hands near $93,800, up about 1% over the past 24 hours and almost 4% over the week, after a volatile start to December. Bond markets are assigning close to a 90% probability to a quarter-point rate cut at the upcoming Fed meeting, raising the prospect that a dovish signal could spark a sharp move that triggers either a short or long squeeze in over-leveraged positions.

Options researchers say sentiment remains fragile despite the recent uptick in price. “Cryptocurrencies face strong resistance to upward movement, with market participants still maintaining a bearish mindset, leaving the market highly vulnerable,” said Adam Chu, chief researcher at options analytics firm GreeksLive.

Derivatives metrics point to short covering rather than a wave of fresh bullish leverage. Open interest in Bitcoin futures and perpetual contracts has been declining since November 21, even as the cumulative volume delta for perpetuals has risen, according to data from onchain analytics platform Velo. That pattern suggests that existing short sellers are closing positions into the recent bounce, helping to lift prices, while new directional exposure in derivatives is not expanding.

At the same time, spot demand looks weak. Funding rates and the so-called Coinbase premium – a gauge of whether spot buyers on major regulated venues are paying above or below global averages – remain neutral, offering little evidence of strong conviction in either direction. Order-book depth for spot and perpetual markets within 10% of the mid-price has turned negative since December 2, indicating that more resting liquidity sits on the sell side than on the buy side as traders hesitate to chase the market higher.

Analysts warn that such conditions can amplify the impact of even modest news. A short squeeze could occur if Bitcoin jumps toward the $96,000 area, forcing traders who bet against the asset to close positions by buying back futures, which can accelerate the rise toward the psychologically important $100,000 level. Conversely, a sharp downside break toward the high-$80,000 range would pressure over-leveraged longs, potentially cascading into forced selling as margin positions are closed.

For now, some market participants see the balance of risks tilted slightly toward a squeeze of bearish positions. “At this stage, a short squeeze looks more likely than a long squeeze,” said Ryan Lee, chief analyst at trading platform Bitget, pointing to steady institutional inflows, gradually more constructive regulatory messaging and a slow shift back toward risk-taking across digital assets. Even so, Lee and other analysts stress that a sustained uptrend would likely require a clear rise in spot buying and a renewed increase in open interest, rather than short-term positioning shifts alone.

Until the Fed clarifies its path for interest rates, Bitcoin’s futures market sits in a high-stakes standoff: billions of dollars in shorts and longs are exposed to relatively small price swings, and the next policy signal from Washington could decide which side is forced to exit first.