Bitcoin is once again trading near its all-time highs. But while retail traders may be celebrating, something unusual is quietly building beneath the surface: Binance’s Bitcoin [BTC] perpetual futures are consistently trading below the spot price—a rare signal that may suggest hidden short pressure.

This deviation is more than just a data quirk. In fact, it’s shaping up to be one of the most sustained and deep futures discounts in recent memory—even as Bitcoin pushes above $105,000. Historically, such patterns often precede explosive short squeezes.

In this article, we explore why institutional players might be shorting BTC at these elevated levels, why that’s a risky move, and what the perpetual futures discount tells us about the current state of market sentiment.

Bitcoin price is high, but perpetual futures say otherwise

To understand what’s going on, we need to step back and revisit how perpetual futures work.

Unlike traditional futures contracts, perpetual futures have no expiration date. They aim to track the spot price as closely as possible through a mechanism called funding rates—recurring payments between long and short holders to keep the price aligned with the actual asset.

In a strong bull market, perpetual futures often trade at a premium. Traders are willing to pay more for leveraged exposure, and the positive funding rates signal bullish conviction.

But right now, something is off. On Binance, BTC perpetual futures are trading $40–$50 below the spot price. This kind of discount usually only happens during crashes or periods of extreme bearishness—not during all-time highs.

That’s why this divergence is raising eyebrows across the crypto market.

A warning sign? BTC Futures trade at sustained discount

Since the beginning of June 2025, this negative premium has held steady. According to data from Alphractal, red bars representing the spot-futures gap have consistently deepened. In past cycles, such negative spreads occurred during bear markets—such as in mid-2022, when Bitcoin plunged under $20,000.

Today’s market, by contrast, is brimming with bullish indicators:

• Bitcoin is above $105K

• Institutional inflows are growing

• Long-term holders are accumulating

• Network activity remains strong

So why is the market showing symptoms of structural short pressure?

One possibility is that institutions are shorting futures to hedge long spot positions. For example, ETFs that continue to buy Bitcoin for long-term exposure may simultaneously open short positions on futures to reduce volatility in their portfolios.

This kind of basis trading (selling futures while holding spot) not only generates profit from the futures discount but also helps funds manage short-term risk. However, it also creates a side effect: it pushes down futures prices, making the discount appear more bearish than it really is.

Still, the persistence of this gap suggests more than just risk-hedging—it may point to a broader imbalance in sentiment.

Cautious sentiment amid bullish charts

Despite Bitcoin’s strong performance, derivatives traders are still reluctant to take on excessive risk. Funding rates across exchanges remain neutral or slightly negative, and few traders are paying high premiums to go long.

This cautious sentiment stands in contrast to the euphoria often seen during previous bull cycles. Back in early 2021, for instance, BTC futures traded at a double-digit premium, and funding rates soared as retail and leveraged funds rushed to chase upside.

Today’s dynamic is different. Spot accumulation is dominated by long-term holders and institutions. Meanwhile, derivatives traders seem more conservative—perhaps due to memories of previous liquidations or macroeconomic uncertainty.

But when too many traders pile onto one side of a trade, it creates an opportunity for the market to move sharply in the opposite direction.

Short squeeze risk: What happens if the gap flips?

The deeper this perpetual futures discount grows, the more dangerous the setup becomes for short sellers.

If BTC continues to climb and the market regains bullish momentum, the futures premium could flip back to positive territory. This would trigger a short squeeze—a sharp move upward fueled by the forced liquidation of short positions.

Here’s how it works:

1. Traders shorting BTC via perpetuals are betting on a price drop.

2. If BTC moves higher instead, their losses grow.

3. At certain thresholds, these traders are forced to buy back BTC to cover their positions.

4. This sudden buying pressure sends prices even higher, squeezing more shorts and triggering a cascade of liquidations.

It’s a classic feedback loop—and it often results in rapid price spikes.

In fact, each time the perpetual discount narrowed or flipped in previous cycles, it was followed by sharp upward moves in Bitcoin’s price. Analysts believe a similar move could happen again—especially with whale wallets showing no signs of distribution.

Institutions are playing the long game

There’s also a deeper layer to this structure. Spot ETFs and large crypto funds continue to absorb Bitcoin from exchanges, driving supply scarcity. At the same time, they may be using derivatives like perpetuals and CME futures to hedge short-term exposure.

This strategy helps them avoid volatility while still participating in long-term price appreciation.

But here’s the catch: these institutional players typically hold onto spot BTC, even when prices dip. That means the available supply for trading remains tight. Combine that with speculative shorting in derivatives, and the stage is set for a supply shock.

If retail traders or funds start aggressively buying BTC while short interest is high, it could unleash a rapid squeeze.

This is why shorting Bitcoin at its peak may not be as clever as it seems.

What traders should watch now

So, what should traders and investors pay attention to in the coming days?

1. Funding Rates: If they flip positive again, it signals rising long interest and potential squeeze conditions.

2. Futures Premium: Watch for the gap between spot and perpetual prices to narrow—this often precedes breakouts.

3. Open Interest: A sharp increase in OI during a price rise may indicate aggressive long positioning.

4. Whale Wallet Movements: If whales begin transferring BTC to exchanges, it could signal incoming sell pressure—but for now, they remain quiet.

5. ETF Inflows: Continued accumulation by ETFs will tighten supply and add upward pressure on spot prices.

Conclusion: A risky game for bears

Bitcoin short sellers are making a bold move by betting against the market at its peak. While institutional strategies may justify such hedging in some cases, the structure is increasingly leaning toward a dangerous imbalance.

With perpetual futures trading at a persistent discount, sentiment among derivatives traders is clearly cautious. But if spot demand continues to grow, the perpetual-futures gap could close fast—setting off a chain reaction of liquidations.

That’s the essence of a short squeeze: slow buildup, fast eruption.

For now, Bitcoin remains strong near its all-time highs. And if past cycles are any guide, those betting against it at this stage may be in for a painful surprise.