Bitcoin Price Bounces Back To $26,000, Here’s Why
September 12 2023 - 3:00AM
NEWSBTC
In a swift turnaround from yesterday’s dip, Bitcoin (BTC) surged to
nearly $26,000 during Asian trading hours on Tuesday. This
recovery, which saw the BTC climb from $25,210 to $25,973 in
a mere 30 minutes (from 3:00 am to 3:30 am UTC), was not driven by
any specific news event. Instead, the dynamics within the Bitcoin
futures market played a pivotal role. Why Has The Bitcoin Price
Bounced Upwards? Renowned analyst Skew provided a technical
perspective on the price movement, referring to it as a “textbook
short squeeze.” Delving deeper into Skew’s analysis, he pointed out
a clear divergence in the Cumulative Volume Delta (CVD) of
perpetual contracts (or “perps”) with the actual price. In trading,
a divergence between CVD and price can signal a potential reversal.
In this context, while sellers were trying to push the price below
$25,000, the CVD indicated that buying pressure was mounting.
Related Reading: Bitcoin Weekly TD Sequential Buy Setup Appears,
But Warns Of Potential Risk Furthermore, the futures market had a
high number of short positions relative to the open interest (OI),
and the funding rate was negative. A negative funding rate
typically means that shorts are paying longs, indicating a bearish
sentiment. Despite attempts to drive the price down, Bitcoin was
reclaiming its swing long price level at $25,300 and failed to
maintain the bearish trend in the lower time frame (LTF). The spot
market, where assets are bought and sold for immediate delivery,
was showing signs of a bullish structure change, with prices
gradually moving higher. Skew suggested that the culmination of
these factors led to a short squeeze, where those who bet against
the market (short sellers) are forced to buy back into the market
to cover their positions, further driving up the price. Skew’s
analysis essentially highlights that while there was a bearish
sentiment with many traders betting against Bitcoin, underlying
indicators were hinting at a potential bullish reversal. For
traders, the immediate goal post-squeeze is to reclaim $26,000.
TheKingfisher offered a more succinct take, hinting at the short
squeeze and its impact on those who were betting against Bitcoin:
“See you around high lev shorters. BTC Cleared them again.” Related
Reading: Bitcoin Price Confirms Double Top, How Low Can BTC Drop?
Axel Adler Jr. shed light on the broader market sentiment, noting,
“Traders do not plan to go any lower. Net Taker Volume has risen by
9.79%. Over the past year, this is a new record for the balance of
open Taker orders with long positions.” Despite the rapid price
movement, the short squeeze’s magnitude was relatively modest.
Coinglass data reveals that about $12.32 million in BTC shorts were
liquidated. For context, the most significant short liquidation
event in the last three months occurred on August 17, amounting to
$120 million, when BTC briefly dipped to $24,700 before making a
quick recovery above $26,600. The decline in open interest in
futures on the major exchanges was also rather small. According to
Coinglass, open interest fell from $10.66 billion to $10.65
billion. This slight decline suggests that few traders had to close
their bets, with funding rates turning positive, signaling a shift
from bearish to bullish sentiment. At press time, BTC stood at
$25,768. Featured image from Millionero Magazine, chart from
TradingView.com
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