Bitcoin short squeeze risk is rising, according to a derivatives strategist who sees a volatile path into early October. Nik Patel predicts a “multi-week whipsaw” that could trap both sides of the market as positioning stretches.
Record ETF inflows after Fed rate cut
Momentum picked up after the U.S. Federal Reserve cut rates by 0.25%. As a result, U.S. spot Bitcoin ETFs notched a record $163 million in net inflows on September 18. Meanwhile, Fidelity Investments reportedly added $97.7 million in BTC, which bolstered sentiment.
However, the derivatives backdrop looks heated. Perpetual Open Interest climbed to a cycle high of roughly 395,000 BTC on September 13. According to the source, shorts were squeezed ahead of the FOMC meeting, then long liquidations followed the rate pullback.
Patel maps a two-sided liquidation storm
Patel forecasts a sharp Bitcoin short squeeze first, triggering about $1.5 billion in short liquidations. Then, by October 7, he expects a reversal leading to roughly $2.8 billion in long liquidations. He frames the setup as a classic bait-and-switch.
Therefore, traders may face choppy conditions into early October. The predicted path suggests expanding ranges, rapid funding shifts, and swift liquidation cascades. Key takeaways include:
- Cycle-high open interest increases squeeze potential.
- ETF inflows improved spot demand after the rate cut.
- Liquidation patterns flipped from shorts to longs post-FOMC.
Meanwhile, market participants are watching whether ETF appetite persists. If inflows slow, the Bitcoin short squeeze could fade faster than expected. Conversely, sustained demand might prolong the move before any long-side trap develops.
For background on crypto market plumbing, see our explainer on how stablecoins work. For price and market cap references, visit CoinMarketCap.
