Ethereum (ETH) short sellers on Binance face growing liquidation risk as roughly $1 billion in bearish derivatives positions clashes with a 35% price rebound from February lows.
ETH Derivatives Buildup on Binance
Since February, approximately 350,000 ETH has been added to open interest on Binance, which now accounts for about 37% of total market share. At press time, ETH traded at $2,318.
CryptoQuant contributor Darkfost noted that the majority of new positions are shorts, despite the price recovery.
"This can be observed through ETH funding rates on Binance, which have reached levels not seen since the previous bear market," Darkfost wrote.
Funding rates on the exchange have remained mostly negative since late January. Rates briefly dropped below -0.01%, a level Darkfost described as rare and indicative of heavy short accumulation. The pressure has already surfaced in liquidation data, with more than $3 million in short positions wiped out twice within a single hour on Binance.
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Darkfost's Short Squeeze Warning
Darkfost framed the current rally as the "early phase of the uptrend," arguing that months of short buildup could keep fueling upside if traders refuse to flip long. "When this level of consensus forms, it is not uncommon for the market to move against the majority, triggering liquidations of the most aggressive positions," he wrote.
Still, there are signs the dynamic may be shifting. Funding rates have started turning positive, with Darkfost citing a reading near +0.01%, though the day's data was incomplete.
A sustained move into positive territory would signal a transition away from disbelief-driven squeezes toward traders aligning with the trend.
ETH has gained roughly 35% since its February low but remains well below its late-2024 highs. Funding rates on Binance have mostly stayed negative for nearly three months, a stretch that has coincided with repeated short liquidation events across the derivatives market.
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