Is A Bitcoin Price Short Squeeze Incoming?

Key Insights:

• Bitcoin price is seeing aggressive shorts increasing while aggressive longs exit.
• Profit-taking has increased since the end of July, reaching a peak of approximately $3.3 billion.
• About 200,032 crypto traders were liquidated, with total losses amounting to $586.21 million, in the past 24 hours.

Bitcoin (BTC) price is continuously increasing in terms of the long-term trend of the asset. Since the August 5th, 2024, market crash, the biggest cryptocurrency has made higher lows and new peaks.

The recent surge saw Bitcoin price make a new ATH of $123K but has since reverted to a short-term pause. This has prompted some holders to profit while derivative traders stack in shorts. How will this impact the price in the coming sessions?

Why A Bitcoin Price Short Squeeze Is Possible?

A quick analysis by Hyblock Capital showed that bull orders were decreasing aggressively at the expense of the growing bear sentiment. The aggregated net longs were at -456 million, while short dominated with $1.34 billion at the time of writing.

Through their post on X (formerly Twitter), the analysis tool noted that longs had only exceeded net shorts at BTC’s local top.

The underlying short orders could be cleared to pave the way for the next move as BTC is still bullish despite the current correction. A revisit of the $123K high could force short sellers to close their positions, fueling more upside.

As BTC price trades at $117K, just below the crucial level at $120K, the price could be gearing to complete the short squeeze. The return to positive inflows for Bitcoin ETFs signaled the shifting structure confined in a range since July 11th.

A Slowdown in BTC Profit-Taking

Looking at profit margins among BTC holders, another reason for a short squeeze emerged. The activity gradually died off after the withdrawal of $3.3 billion as whales resumed buying.

According to CryptoQuant’s author, Darkfost, the weekly net realized profit/loss showed a spike in profit-taking since Satoshi-era BTC was sold. However, this had cooled off, opening the door for the Bitcoin price to bounce.

As depicted in the metric, the profit-taking has been intense at peaks and a cool below the $1.5 billion net has sparked rallies. Now, will a shift back to Bitcoin price bullishness see the light of day?

Surge in Crypto Liquidations

The shift back to a long-term outlook could be on its way, as another instance denoted. Historically, huge liquidations have led to price rallies like the August 5th financial markets crash.

CoinGlass data showed that about 257K crypto traders were liquidated in the last 24 hours, resulting in $777 million realized losses. The biggest liquidations happened on Ethereum (ETH), followed by XRP at $161M and $94, respectively.

Bitcoin, Solana (SOL), Dogecoin (DOGE), and Cardano (ADA) followed respectively. From the look of things, long traders had been affected more, prompting a common market practice. The markets usually take out weak hands and respond by rallying higher.

Meanwhile, the daily trading volume was dominated by Ethereum with $124B, almost 1.5x the multiple of Bitcoin. However, the value had dropped compared to the previous day’s data.

In conclusion, it could be time to go for the shorts after the liquidations that mostly targeted longs. Short orders are rampant following the recent trends in the crypto market. That way, price would have to revisit higher levels in most pairs, including BTC, which should see the realization of a short squeeze.

Disclaimer

This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.