Bitcoin (BTC) surged 21% from early April into the first week of May, climbing from roughly $68,100 to just above $82,000 while many futures traders stayed positioned for a price drop, triggering a classic short squeeze.
A Short Squeeze Fuels Bitcoin’s 21% April Surge
13 May 2026 - 08:30 CEST
US spot Bitcoin ETFs recorded nearly $2bn in net inflows during April, providing spot support even as derivatives activities amplified the move.
Shorts forced to buy as BTC rallies
From 1 Apr to 7 May, total short liquidations reached approximately $2.21bn, compared with about $1.08bn in long liquidations. A short squeeze happens when rising prices force traders who bet against Bitcoin (short sellers) to buy back the asset to close positions, adding further upward pressure. If traders were broadly long and euphoric, long liquidations would typically dominate on pullbacks and funding rates would stay positive. Instead, the opposite played out.
Chart
(Source: Coin Metrics)
Negative funding reveals bearish bets
Perpetual futures – contracts that let traders speculate on Bitcoin’s price direction without expiry dates — showed funding rates negative on most days after the first week of April. Negative funding means short traders pay longs to hold positions, signalling bearish or hedged sentiment and reluctance to chase the upside.
A rising price combined with negative funding often shows the market was under-positioned rather than overheated. Several of Bitcoin’s strongest days aligned with heavy short liquidations. On 13 Apr, BTC rose more than 5% as short liquidations hit roughly $218mn versus only $8mn in longs. Four days later, short liquidations peaked at approximately $344mn – the largest single-day event in April. Similar patterns emerged on 22 Apr, 1 May and 4 May.
"Traders are actively building short positions and betting against a breakout, creating conditions where a short squeeze becomes more likely if upward momentum persists," noted Vetle Lunde, head of research at K33, in commentary on similar dynamics.
Spot volume lags despite price surge
Liquidations act as an accelerant rather than the sole cause. Initial spot buying pushes prices towards liquidation levels, then forced covering creates a reflexive feedback loop that accelerates the move beyond what discretionary demand alone might achieve.
Chart
(Source: Coin Metrics)
Spot volume – trading activity on exchanges for immediate settlement, rather than futures – picked up on key upside days. However, average spot volume in April and early May fell below the February–March baseline, and the spot-to-perpetual volume ratio declined. This weakens the case for a pure spot-led accumulation breakout, where sustained organic buying by long-term holders would drive expansion in spot activity with less reliance on derivatives.
Hybrid rally with spot support
The cleanest interpretation is therefore hybrid: Bitcoin’s April rally was not purely a derivatives-driven move, nor a clean accumulation breakout. Spot demand, including strong ETF inflows, supplied the initial bid, while forced short covering delivered much of the acceleration into a sharper appreciation phase.
By 7 May, funding remained slightly negative at –1.38% annualized. This reinforces that aggressive long positioning did not drive the move. ETF flows and institutional buying helped tighten supply, but the disconnect with spot volume highlights the rally's short-squeeze character.
This set-up shows how bearish positioning can fuel sharp rallies even without massive new spot inflows. For May and beyond, the key question is whether shorts rebuild at higher levels or if sustained ETF demand shifts the narrative towards genuine accumulation. A reversal risk remains if leverage rebuilds without fresh spot buying.
