Bitcoin (BTC) broke by $42,000 on Jan. 11 as expectations of a contemporary “short squeeze” mounted.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
Short-term squeeze “reasonably likely”
Data from Cointelegraph Markets Pro and TradingView adopted BTC/USD because it recovered from Monday’s dip to $39,600 — its first breach of the $40,000 mark since September.
While short-term bullish prognoses had been conspicuously absent on the day, consideration centered on the potential for derivatives markets to spark one other “short squeeze.”
With open curiosity close to all-time highs regardless of the downturn and sentiment clearly favoring additional draw back, a shock uptick may have the affect of “squeezing” brief positions and offering some reduction for bulls.
As on-chain analytics agency Glassnode famous within the newest version of its weekly publication, “The Week On-Chain,” such an occasion is overdue. Longs have suffered virtually continuously since November’s $69,000 all-time highs, and “squeezes” additional happen when the market least expects a sure final result.
“Short traders, who have not been punished for taking on increasing risk, may find themselves candidates for a near-term squeeze,” researchers forecast.
Such an occasion may nicely be amplified due to “tepid” demand for spot BTC and futures open curiosity leverage, which is approaching 2% of the Bitcoin market capitalization, Glassnode continued.
“Alongside very oversold indicators in on-chain spending activity, this suggests a short squeeze is actually a reasonably likely near-term resolution for the market,” the publication concluded.
Bitcoin futures open curiosity leverage ratio annotated chart. Source: Glassnode
For each brief, there’s a protracted
Analysts, in the meantime, thought-about alternate options to the excessive open curiosity being eliminated through one other leg down towards $30,000.
Related: ‘Most bullish macro backdrop in 75 years’ — 5 issues to look at in Bitcoin this week
Despite no “wipeout” of open curiosity but occurring, a shock upside transfer may but be the occasion that resets market composition, widespread Twitter account Credible Crypto argued on the day.
“What if the major OI wipeout everyone is looking for ends up happening because of a squeeze to the upside rather than a move further down?” he quizzed in response to information from fellow analyst William Clemente.
“Happened in August ‘21 as we moved off the 30K bottom. Think we probs see that play out again. Bears bout to be wiped clean.”Bitcoin futures open curiosity chart (Binance). Source: Coinglass
As Cointelegraph reported, $40,000 has been forming a major value zone from a number of factors over the previous 12 months.