I don't pay close attention to the lending rates, just the number of open longs and shorts. Violent reversal green candles like the one on 4H April 12th 0800 UTC are definitely the product of short squeezes.
The recent trend in drop in price corresponding with a decrease in both shorts and longs is indicative of money leaving the ecosystem (or moving to the sidelines to wait for bottom) There isn't enough new money flowing in right now. I think we will see 5k before 10k...
I think it's important to get cause and effect in the right order here - you can't have a short squeeze with out price rallying first ie price rallying triggers margin calls on short positions. This then adds to pre-existing buying pressure.
Remember, people getting squeezed are, for arguments sake, "dumb money". Initial reversals are caused by "smart money":
The dumb/smart classification is of course an over simplification as some of the people getting squeezed are being trailed rather than liquidated etc.
Regardless, the "dumb" traders are on the wrong side of the market and the "smart" traders are correct. The smart traders cause the rally, the dumb traders are affected by it (and then affect it indirectly, reinforcing existing momentum as their positions are liquidated/covered).
This is a useful tool...