Bitcoin Short Squeeze Lifts Prices Back to $26K

A short squeeze refers to a price rally driven by an unwinding of bearish bets.

Bitcoin’s price chart (CoinDesk/Highcharts.com)

The decline in open interest seemed to stem from shorts abandoning their bearish bets, as funding rates flipped positive around the same time.

Funding rates refer to costs associated with holding bullish or bearish bets in perpetual swaps (futures with no expiry). Negative rates imply leverage is skewed on the bearish side, while positive rates suggest otherwise.

“[It’s] a textbook short squeeze,” pseudonymous trader and analyst @52kskew said on X.

Bitcoin and alternative cryptocurrencies (altcoins) fell Monday as fears of potential selling pressure from bankrupt crypto exchange FTX roiled market sentiment.

Prices rose as open interest dropped and funding rates turned positive. (Velo Data) (Velo Data)

Though impressive, the price recovery from crucial support at $25,000 may remain capped due to a lack of immediate bullish catalysts. The bitcoin spot ETF optimism has faded, with observers shifting focus to the impending liquidation of FTX’s altcoin holdings.

Per some observers, the bias remains bearish while prices are held below the 50-day simple moving average.

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“Bitcoin price is $25,836 below the 50-day moving average of $27,731 – which is bearish – and the week over price price decreased by 0.5%. Ethereum (ETH) price is $1,617 below the 50-day moving average $1,752 – which is bearish – and the week over price decreased by 1.1%. Overall, the trend is down, which indicates a bearish sentiment,” crypto services provider Matrixport’s Markus Thielen said.

Edited by Parikshit Mishra.

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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk’s Markets team.

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