Analysis: In the current market, the risk of a downside squeeze is greater than that of an upside short squeeze, with long funding pressure continuing to rise.
BlockBeats News, May 28th – Cryptocurrency analyst Murphy stated that in the current perpetual contract market, longs are paying shorts approximately $390,000 in funding fees per hour, significantly higher than the 7-day average of $220,000. This indicates that the market sentiment is largely bullish, with longs bearing a high cost of holding positions. He pointed out that since the 7-day average funding fee turned positive on May 12th, the long premium has continued to expand, especially in recent days. A high funding fee means that longs cannot subsidize shorts indefinitely. If the price fails to rebound quickly, some longs may proactively close their positions due to cost pressure.
At the same time, the Open Interest (OI) of the market has entered a downward channel, indicating that liquidation and deleveraging are occurring. Murphy believes that if BTC once again falls below a key support level, it may trigger a cascading liquidation event, leading to a typical "long squeeze" scenario. He stated that the current market conditions are starkly different from the sustained uptrend phase after April 14, 2026. At that time, the funding fee remained negative for a long period, with shorts continuously paying fees to longs.
However, he also pointed out that extreme funding fees sometimes trigger a round of "long liquidation" first before a subsequent short squeeze occurs. Overall, he is more inclined to believe that the current market faces a greater risk of a downside squeeze than an upside squeeze. Murphy reminded that current spot demand and on-chain activity are relatively low, while the complexity of futures trading has significantly increased. Therefore, participants should be cautious when engaging in leveraged trading. On the other hand, investors who practice dollar-cost averaging with spot purchases or gradually build long-term positions can continue with their current strategies.
