Bitcoin Price Recovery: A Potential Short Squeeze on the Horizon?
After a tumultuous week, Bitcoin seems to be stabilizing. From a significant support level around $115,000, the cryptocurrency is now showing signs of recovery. Some even speculate that it might be heading towards new highs this week, given the current momentum. Crypto analyst Luca, drawing on recent trends, suggests that the recent plunge might have been a temporary setback. There may also be a short squeeze in the offing.
Bitcoin’s Potential to Breach the $123,000 Mark Yet Again
In one of his posts on platform X, Luca indicated that the recent fluctuations in Bitcoin prices might have been orchestrated by market makers. The initial downward shift, he posited, was likely an attempt to shake out late longs. This move was likely in response to crypto traders trying to capitalise on the euphoria stirred up by Bitcoin’s new all-time highs.
Shorters Caught Off Guard: A Reversal in the Making
Then came a twist. A reversal seemed to be in the works, catching shorters off guard and liquidating support levels. This reversal occurred as bears were lulled into thinking prices would continue to drop, only to be blindsided by a surge back up above $118,000. This resulted in liquidations amounting to hundreds of millions of dollars.
Bitcoin Funding Rate Drop and Rise in Open Interest
All these developments coincided with a drop in the Bitcoin funding rate. Data from Coinglass indicates that the Bitcoin OI-Weighted Funding Rate fell below 0.01% briefly on Sunday, having peaked at 0.0167% earlier in the week on July 23. Meanwhile, the Bitcoin Premium metric also slipped into negative territory, as revealed by Luca.
Open Interest Peaks Amidst Bitcoin Price Recovery
Interestingly, open interest surged when Bitcoin prices fell. As prices began to recover, open interest also started climbing, leading Luca to infer that short positions were getting squeezed. If this squeeze persists, Bitcoin prices could skyrocket, leading to the liquidation of tens of thousands of short positions.
Bitcoin Open Interest Reveals Trader Exposure
As Bitcoin prices oscillated between $115,000 and $120,000, Bitcoin open interest followed suit, reaching record highs. Despite market volatility, crypto traders continue to open positions, betting on Bitcoin’s next big move. Open interest hit $87.89 billion on July 15 and has been averaging above $80 billion daily since then.
Shorters in the Lead, But For How Long?
Currently, shorters are leading, with a Binance Long/Short ratio of 53.97% compared to 46.03% for long accounts. This lends weight to Luca’s prediction of a potential short squeeze, which could force out shorters and propel Bitcoin prices to new all-time highs.
Bitcoin Bulls Push Again for $120,000
As the week draws to a close, Bitcoin bulls are pushing once again towards the $120,000 mark. Only time will tell if the current recovery will hold and lead to new highs, or if another reversal is in store.
Featured image from Dall.E, chart from TradingView.com
