Within hours, around $ 150 million worth of shorts were liquidated as the price of Bitcoin (BTC) rose from around $ 47,000 to over $ 53,000 on Monday.
The cryptocurrency market as a whole saw a strong short squeeze as Ether (ETH), Binance Coin (BNB) and other major cryptocurrencies also gained around 15% over the same period.
After Bitcoin’s rebound of 12% in a single day, the futures market has completely reset and funding rates are hovering at neutral levels.
Why Today’s Bitcoin Short Squeeze Is Bullish
A short squeeze in trading refers to when short sales on the futures market are liquidated in a short period of time.
When short positions are liquidated, short sellers are forced to buy back their positions ironically, which, ironically, increases buyer demand in the market.
Therefore, the number of short positions is rapidly decreasing and long contracts or buy orders dominate the market.
When the number of longs increases significantly, Bitcoin’s funding rate increases. This is because the funding rate increases as there are more long orders in the market.
If the funding rate is above 0%, buyers will have to pay short sellers part of their position to sellers every eight hours, and vice versa.
For Bitcoin, the funding rate has remained relatively low over the past 24 hours despite BTC’s strong rally.
According to Bybt.com, the funding rate on major exchanges for Bitcoin is below 0.01%, which is below the neutral rate
This means that there are still more short positions than long positions in the Bitcoin futures market, which could result in a higher uptrend.
This trend is bullish for Bitcoin as it comes after a mass liquidation of short contracts. Lex Moskovski, Chief Investment Officer of Moskovski Capital said:
“~ $ 150 million in #bitcoin shorts were liquidated on this brief climb. Nothing smells better than roasted bears in the morning. “
Traders believe Bitcoin could have higher goals in the short term
In the short term, traders say the $ 55,500 price level is an important one to get a chance at new all-time highs.
Johnny, a cryptocurrency derivatives trader, said:
“We passed the lows and now we have a very strong jump. We’re not out of the woods yet. Reclaim $ 55,500 and then we can talk about new ATH. Play it level by level for now. Strong response so far. “
Adnan Van Dal, a former institutional trader, stressed that if Bitcoin doesn’t fall until the US market opens, the likelihood of a bigger rally increases.
“If $ BTC makes it to the US Open (EUR am) I think Cud is fine for a little. Orders of durable goods on open, actual dates were good, SPX near ATH post useful for profit taking and started solid. Thinking helps – random SPX / $ BTC weakness is a thing this year. TSLA Wildcard 18r tho. “
As long as Bitcoin stays above $ 51,000 on its way to the US market and aims for a recovery above $ 55,000, the chance of an all-time high in the foreseeable future remains great.