The short squeeze that vaporized $2.74 billion in Bitcoin and Ethereum futures in 60 minutes on August 19 is over. The charred wreckage of over-leveraged bears is still smoldering. But here's the data point that should make you pause: three trading firms are still holding north of $600 million in short positions. Abraxas Capital, Fasanara Capital, and Wintermute. Not liquidated. Not closed. Still there.
That's not a contrarian headline. It's a structural signal. Last week, Lookonchain and Onchain Lens flagged the wallets: four separate positions on Hyperliquid and other platforms, with liquidation prices so far above current spot that they scream 'hedge,' not 'bet.' Bitcoin at $77,300, Ethereum at $2,440. Their liquidation levels? BTC at $128,000 to $251,000. ETH at $3,958 to $4,008. That's a 66% and 62% buffer respectively. These aren't gamblers praying for a dump. These are market makers playing a different game.
Context: The anatomy of a short squeeze
The August 19 event was a textbook cascade. On-chain data showed a sudden spike in open interest on Hyperliquid, followed by a cascade of stops as BTC broke $75,000. The 60-minute window saw 13亿美元的 short liquidations, according to Coinglass. The total for the week hit $2.74 billion. The narrative wrote itself: 'Bears crushed, bulls in control.'
But the on-chain footprint told a different story. Lookonchain's tracker, which I've been using since 2021 to sniff out OTC desk movements, showed that the three biggest short positions didn't close. They actually increased. Wintermute, the most active market maker, added $190 million in short exposure on Hyperliquid alone. Abraxas Capital's four positions—$58 million in unrealized loss—stayed open. Fasanara Capital's 15x leveraged ETH short now sits 18.87% underwater.
Why would professional firms hold losing positions in a raging bull market? The answer is in the liquidation price. Delta-neutral hedging. These firms are likely long spot BTC/ETH elsewhere—on exchanges, in OTC desks, or in structured products. The short futures positions offset the delta, locking in funding rate arbitrage or protecting against downside. They're not betting against the rally. They're selling volatility to the frenzy.
Core: The data behind the hedge
Let's break down the numbers. I pulled the positions from the on-chain dashboards at 10:00 UTC today.
- Abraxas Capital: Four positions totaling ~$400 million in notional short exposure. Unrealized loss: $58 million. Liquidation prices: BTC at $128,000, $145,000, $180,000; ETH at $3,958. The distance to liquidation is enormous—more than 60% for both.
- Fasanara Capital: One ETH position on 15x leverage, size ~$80 million. Liquidation at $4,008. Current floating loss: 18.87%. That's painful but not panic-inducing for a firm with a balance sheet likely in the billions.
- Wintermute: Multiple shorts on Hyperliquid totaling ~$190 million, with liquidation prices above $200,000 for BTC. No ETH positions detected.
Three key implications emerge. First, the funding rate on perpetual swaps is still positive—meaning longs pay shorts. These firms are collecting that funding every 8 hours. Second, the open interest in BTC and ETH is still elevated, suggesting that the deleveraging from the squeeze hasn't fully cleared. Third, the fact that Wintermute chose Hyperliquid—a relatively new on-chain derivatives platform—over centralized exchanges like Binance or Bybit signals a shift in institutional infrastructure.
Based on my surveillance of perpetual swap funding rates since 2020, I've seen this pattern before. During the 2021 run-up, market makers like Alameda Research and Wintermute would maintain large short positions on Deribit and FTX to hedge their spot inventory. The difference then was that the shorts were on centralized platforms with opaque order books. Now, they're on-chain, transparent, and trackable by anyone with a browser. Speed is the currency, but accuracy is the vault.
But here's the nuance that most retail traders miss: these positions are not static. They are dynamic hedges that adjust as spot prices move. If BTC rises another 10%, Wintermute will likely increase its short to maintain the hedge. If BTC drops, they'll reduce. The $600 million figure is a snapshot, not a wall.
Contrarian: The blind spot in the squeeze narrative
The market narrative is that the short squeeze is the engine of this rally. The reasoning: as shorts are liquidated, they buy back, pushing prices higher, forcing more shorts to cover. Circle of life. But the data from the three firms suggests the engine is running out of fuel. The remaining shorts are not speculative—they are structural. They won't be forced to cover unless BTC doubles or ETH jumps 60%. That's not a near-term catalyst.
What happens when the squeeze narrative fades? The market looks for the next story. And the story from these firms is that they are willing to hold $600 million in unrealized losses because they are earning funding rate yield and the delta hedge is working. The contrarian angle: the lack of speculative shorts means the buy pressure from covering is gone. The rally from here will be driven by new longs, not forced covering. And new longs are expensive—funding rates are positive, and the cost of holding a position is rising.
Echoes of 2017 whisper through every new bull run. In 2017, the Bitcoin futures market saw a similar pattern: rampant long speculation, high funding rates, and market makers shorting into strength. When the music stopped, the funding rate turned negative, and the longs got crushed. The difference this time is that the hedge is on-chain, transparent, and large. But the dynamics are the same. The market is borrowing from the future to pay for today's rally.
Takeaway: What to watch next
The next signal isn't the price of BTC or ETH. It's the funding rate and the open interest. If the funding rate stays positive and OI continues to climb, the rally has legs. But if funding starts to drop—meaning shorts become expensive to hold—the market makers will unwind their hedges, buying back their shorts, and that could actually provide a floor. The irony is that the hedge that seems bearish is actually a stabilizing force.
But I've been watching this market for 28 years in various forms. The ledger doesn't forget. When the funding rate flips negative, watch the liquidation cascade from the long side. The $600 million ghost is real—but it's not a sign of bearishness. It's a sign of a market that has priced in the squeeze and is now pricing in the hangover.