Bitcoin returns to $ 42,000 as expectations of a ‘short squeeze’ rise to the upside

Bitcoin (BTC) price surpassed $ 42,000 on January 11, at the same time that the expectations of a new “short squeeze” increased.

BTC / USD (Bitstamp) 1-hour candlestick chart. Source: TradingView

A short-term short queeze is “reasonably likely”

Cointelegraph Markets Pro and TradingView data followed on the BTC / USD pair as it recovered from Monday’s slide to $ 39,600, its first breakout of the $ 40,000 mark since September.

While short-term bullish forecasts were conspicuously absent on the day, The focus was on the possibility of derivatives markets triggering another short squeeze.

With open interest near its all-time highs despite the slide and clearly favorable sentiment to the downside, a surprise rally could have the impact of “squeezing” short positions and providing some relief to the bulls.

As the on-chain analysis company Glassnode points out in the latest edition of its weekly newsletter, “The Week On-Chain”, such an event is pending. Longs have suffered almost constantly since November’s all-time highs of $ 69,000, and squeezes also come when the market least expects a certain result.

“Short traders, who have not been punished for taking increasing risk, may be candidates for a short-term squeeze.“predict the researchers.

Such an event could well be amplified thanks to the “tepid” demand for spot BTC and the leverage of the open interest of futures, which is approaching 2% of the market capitalization of Bitcoin, Glassnode continued.

“Coupled with the oversold indicators in on-chain spending activity, this suggests that a short squeeze is actually a reasonably likely short-term resolution for the market.”, concluded the newsletter.

Graph with comments of the leverage ratio of the open interest of Bitcoin futures. Source: Glassnode

For every short, there is a long

For its part, Analysts considered alternatives to the elimination of the high open interest through another leg to the low towards USD 30,000.

Although there has not yet been an “erasure” of open interest, a surprise upward movement could be the event that restores the composition of the market, as argued by the popular Twitter account Credible Crypto.

“What if the big open interest erasure that everyone is looking for ends up being a squeeze to the upside rather than a move further to the downside?” questioned in response to data from fellow analyst William Clemente.

“It happened on August 21 when we came out of the bottom of 30,000. I think we’ll probably see that again. The bearish momentum is about to fade. “

Open interest chart of Bitcoin (Binance) futures. Source: Coinglass

As Cointelegraph reported, The $ 40,000 mark has been forming a significant price zone from multiple points in the last 12 months.

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