Bitcoin (BTC) experienced a significant surge during Asian trading hours, pushing its price back to nearly $26,000 after a recent decline that saw it hit three-month lows below $25,000. This uptick in price is attributed to a short squeeze, characterized by a rally driven by the unwinding of bearish derivative bets.
As Bitcoin’s price rallied, the cumulative open interest in futures and perpetual swaps on major exchanges like Binance, Bybit, OKX, and Deribit decreased from $5.05 billion to $4.8 billion. Open interest represents the total value locked in active positions. This decline suggests that traders with short positions were closing them, coinciding with a shift to positive funding rates.
Funding rates pertain to the costs associated with holding long or short positions in perpetual swaps (futures contracts without an expiry date). Negative rates indicate a market biased towards bearish bets, while positive rates suggest the opposite.
This rally comes after a decline in Bitcoin and alternative cryptocurrencies (altcoins) on Monday, triggered by concerns about potential selling pressure from the troubled crypto exchange FTX.
Bitcoin’s Rapid Rebound: Short Squeeze Propels BTC Above $26,000
Despite this impressive recovery, the price of Bitcoin could face resistance due to a lack of immediate bullish catalysts. The optimism surrounding a Bitcoin spot ETF has waned, and market observers are now focused on FTX’s impending liquidation of altcoin holdings.
Many analysts believe that the bearish bias will persist as long as Bitcoin’s price remains below the 50-day simple moving average. This moving average currently sits at $27,731, and the price of Bitcoin is below it at $25,836. Similarly, Ethereum (ETH) is also below its 50-day moving average, suggesting a bearish sentiment in the market.
It’s important to note that cryptocurrency markets can be highly volatile, and price movements are influenced by a variety of factors, including market sentiment, news events, and trading activity.