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.


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

Short-term
squeeze
“reasonably
likely”

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
On-Chain,”
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
capitalization,
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.


Bitcoin
futures
open
interest
leverage
ratio
annotated
chart.
Source:
Glassnode

For
every
short,
there’s
a
long

Analysts,
meanwhile,
considered
alternatives
to
the
high
open
interest
being
removed
via
another
leg
down
toward
$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
move
could
yet
be
the
event
that
resets
market
composition,
popular
Twitter
account
Credible
Crypto
argued
on
the
day.

“What
if
the
major
OI
wipeout
everyone
is
looking
for
ends
up
happening
because
of
a
squeeze
to
the
upside
rather
than
a
move
further
down?”
he

quizzed

in
response
to
data
from
fellow
analyst
William
Clemente.

“Happened
in
August
‘21
as
we
moved
off
the
30K
bottom.
Think
we
probs
see
that
play
out
again.
Bears
bout
to
be
wiped
clean.”


Bitcoin
futures
open
interest
chart
(Binance).
Source:
Coinglass

As
Cointelegraph
reported,
$40,000
has
been
forming
a

significant
price
zone

from
multiple
points
over
the
past
12
months.

read original article here