Bitcoin returns to $42K as bets start favoring 'short squeeze' higher for BTC
Bitcoin (BTC) broke through $42,000 on Jan. 11 as expectations of a fresh "short squeeze" mounted.
Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it recovered from Monday's dip to $39,600 — its first breach of the $40,000 mark since September.
While short-term bullish prognoses were conspicuously absent on the day, attention focused on the potential for derivatives markets to spark another "short squeeze."
With open interest near all-time highs despite the downturn and sentiment clearly favoring further downside, a surprise uptick could have the impact of "squeezing" short positions and providing some relief for bulls.
As on-chain analytics firm Glassnode noted in the latest edition of its weekly newsletter, The Week Onchain, such an event is overdue. Longs have suffered almost constantly since November's $69,000 all-time highs, and "squeezes" further occur when the market least expects a certain outcome.
"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 event could well be amplified thanks to "tepid" demand for spot BTC and futures open interest leverage which is approaching 2% of the Bitcoin market cap, 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 newsletter concluded.
Analysts meanwhile considered alternatives to the high open interest being removed via another leg down towards $30,000.
Related: ‘Most bullish macro backdrop in 75 years’ — 5 things to watch in Bitcoin this week
Despite no "wipeout" of open interest yet occurring, a surprise upside
Read more on cointelegraph.com
