Binance ETH open interest surged 350,000 ETH since February as shorts dominate despite a 35% price gain, raising short squeeze risks.
Ethereum derivatives activity on Binance has picked up at a pace that stands out. Since February, open interest on the exchange has grown by around 350,000 ETH. That growth pushed Binance’s share of total ETH open interest to roughly 37% of the entire market.
At current prices, that figure translates to over $1 billion flowing into Binance’s ETH perpetual contracts, according to Binance’s own futures trading data.
Bears Keep Betting Against the Price Tape
What makes this unusual is the direction most of those bets are pointing. ETH has climbed approximately 35% from its February low. Yet traders on Binance have largely used that open interest surge to short the market, not buy it.
As Darkfost_Coc noted on X, funding rates on Binance have stayed mostly negative since late January. That’s a direct read of market positioning. When funding is negative, short sellers pay longs. It means shorts outnumber longs. The degree of negativity here, with rates dropping below -0.01%, has not been seen since the previous bear market, Darkfost_Coc pointed out.
That level of bearish consensus is rare. It also carries a specific risk for the traders holding those positions.
The Setup That Could Burn Short Sellers
When short positions pile up this aggressively, the market has a habit of moving in the opposite direction. This is the mechanics of a short squeeze. Rising prices force short sellers to buy back their positions, which pushes prices even higher.
Darkfost_Coc on X pointed to exactly this dynamic, noting that within a single hour, more than $3 million in short positions were liquidated twice on Binance. That happened in one session. The conditions that produced it have not gone away.
Ethereum open interest has gone through dramatic swings before, but the current setup differs in one key detail. The short positions that have accumulated over months are still sitting in the market. They have not been fully flushed. That buildup, Darkfost_Coc argued, could keep fueling the early phase of an uptrend as sellers get caught offside.
Funding Rates Shifting, But Slowly
There is some evidence that the positioning is starting to change. Funding rates on Binance have begun moving back toward positive territory, reaching approximately +0.01% in recent sessions, though Darkfost_Coc noted that day’s data was not yet complete at the time of the post.
If that shift holds, it signals that derivative markets may start supporting upward price movement rather than fighting it. For short sellers who entered late, that would make conditions much harder to survive.
The broader ETH short squeeze risk has been building for months. Staking lockups already reduced available supply. Layered on top of that, concentrated short positioning on Binance creates the kind of imbalance that historically resolves quickly and violently.
The positioning remains extreme. The price keeps climbing. Those two things cannot coexist indefinitely.
Disclaimer: This article is based on technical analysis and on-chain data from the cited sources. It does not constitute financial or investment advice.
