Bitcoin Short Contracts Gaining Interest – Short Squeeze Potential Looms
Bitcoin’s recent price drop has caught the attention of short traders looking to capitalize on further declines in BTC price. The increasing interest in Bitcoin short contracts has raised concerns about a potential short squeeze.
A short squeeze occurs when short sellers rush to cover their positions, resulting in a rapid price increase. Bitcoin’s price plummeted on June 11, reaching a daily low of around $66,500 before a slight recovery. This downward trend could entice more traders to take short positions, heightening the risk of a short squeeze.
The recent dip in Bitcoin’s price has attracted more short sellers, anticipating further losses. However, this surge in short interest could lead to a short squeeze if the price reverses and begins to climb.
Reports indicate that there are over $12 billion in Bitcoin short positions, with prices hovering around $74,000. If Bitcoin’s price approaches this level, traders face the possibility of liquidation, resulting in significant losses. This scenario could force short traders to cover their positions, creating buying pressure and driving prices higher.
Market data suggests strong support around the $65,000 mark, indicating a potential price rebound if Bitcoin stabilizes at this level. A rebound could trigger short traders to cover their positions, leading to a rapid price increase.
Furthermore, rising open interest and trading volume indicate growing bullish sentiment for Bitcoin, posing a threat to short traders. The sustained rise in interest from March to May reflects trader enthusiasm and speculation, potentially fueling a rally.
Despite the bullish indicators, some believe that a short squeeze may not materialize due to factors like derivative products setting price ceilings. However, bullish technical patterns such as the ‘bull flag pattern’ suggest a potential uptrend that could disrupt short traders’ plans.
The ‘bull flag pattern’ typically occurs after a sharp price increase followed by consolidation, signaling a potential breakout and uptrend. If Bitcoin confirms this pattern, analysts project a price target of around $118,100, representing a significant upside potential for BTC.