The Bitcoin derivatives sector suggests an imminent “short covering event” which could trigger a significant increase in Bitcoin’s price, possibly ending its downward trend. This optimism is further supported by analysts who are now predominantly positive, attributing it to the robust technical pattern observed in Bitcoin’s chart and encouraging macroeconomic indicators.
Bitcoin Price To Witness “Short Squeeze”
The cryptocurrency market appears to be rebounding strongly, even though the funding rates for Bitcoin and numerous alternative coins (altcoins) remain negative. This suggests that a significant “short covering event” may occur soon.
Based on findings from K33 Research, the daily average annualized Bitcoin perpetual funding rate had reached its lowest point in over a year on Tuesday, last seen during the period when US bank failures caused panic among investors. This suggests that there is currently a higher level of potential negative outcomes for Bitcoin traders.
The forecast suggests a possible depletion of buying power on the sell side, signaling an upcoming short squeeze could occur shortly. The graph shows a significant increase in Bitcoin’s open interest during periods when the perpetual funding rates were negative.
According to K33 analysts Vetle Lunde and David Zimmerman, the average funding rates for perpetual swaps have remained below zero for the past week, while there’s been a significant rise in open interest. This pattern indicates heavy shorting, setting up conditions that could potentially lead to a “short squeeze.”
Dramatic increases in Bitcoin’s price may compel traders to sell their short contracts, leading to a surge in short liquidations. This situation can amplify the upward trend of Bitcoin prices. Such developments might alter the general direction of the cryptocurrency market, fostering optimism among investors.
Simultaneously, the worldwide stock indicator soared to reach an all-time peak, and gold followed suit by also reaching a fresh record high. Concurrently, the U.S. dollar index (DXY) and 10-year Treasury yield touched their lowest points for the year, which in turn fueled an upward trend in the price of Bitcoin.
Analysts Turned Bullish on BTC
As an analyst, I’ve noticed a consistent increase in investments into Bitcoin Exchange-Traded Funds (ETFs), which has been a significant factor driving the recent Bitcoin rally. Moreover, the Fear and Greed Index shows signs of recovery. However, it’s essential to keep in mind that the ongoing US political climate, particularly during elections, continues to influence Bitcoin and other cryptocurrencies. Yesterday alone, Bitcoin ETFs recorded $88 million in inflows, with BlackRock’s Bitcoin ETF accounting for $55.4 million of those investments.
According to the crypto expert known as Rekt Capital, Bitcoin might move into a period of reaccumulation following its halving if its value surpasses $60,600 in the current week. Currently, the Bitcoin price remains under the significant threshold of $60,000.
Longtime trader Peter Brandt has commented that the charts for Bitcoin (BTC) and Ether are still attracting attention. The weekly and daily graphs of BTC are shaping up as a megaphone or widening triangle pattern, which suggests market instability and indecision. However, this configuration often predicts an upcoming significant price shift.
The potential exists for Bitcoin’s price to approach its record peak of $73,835, though it’s important to note that no definitive prediction about the upcoming direction has been made yet. Factors such as the recent large-scale BTC transfer worth $700 million by Mt. Gox and the ongoing political dynamics are influencing market fluctuations.
As a crypto investor, I’m observing a resurgence in BTC prices, pushing them back towards $60,000 after dipping below that mark. Currently, the price stands at $59,648. However, it’s important to note that trading volume has seen a 8% decrease over the past 24 hours, suggesting a potential drop in trader interest.
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2024-08-21 11:02