Bitcoin (BTC), the flagship cryptocurrency, is currently drawing significant attention as it stands poised for a potential upward surge. Santiment, a leading blockchain analytics platform, has identified a pivotal factor that could pave the way for a substantial rally in Bitcoin’s price.
This factor centers around the remarkable increase in short interest observed on two of the most prominent cryptocurrency exchanges in the world, igniting hopes of a short squeeze that could propel BTC’s value well beyond the $30,000 mark.
Santiment’s comprehensive analysis cited in a new report delves into the evolving landscape of Bitcoin trading, revealing a noteworthy development that has captured the imagination of crypto enthusiasts and market observers alike.
Bitcoin Short Interest Sparks Optimism
Santiment’s data reveals that traders have been aggressively shorting Bitcoin on both Deribit and Binance, a trend that has emerged over the past week. This surge in short positions has coincided with a 4% increase in Bitcoin’s price during the same period, prompting optimism within the crypto community.
📊 #Bitcoin traders are aggressively shorting on both #Deribit and #Binance, making potential liquidations more likely to boost prices. $BTC‘s price is +4% since the increase in shorting began to appear last week. This has a good probability of continuing. https://t.co/c8eTpAxIoP pic.twitter.com/8REpjp2rtx
— Santiment (@santimentfeed) September 20, 2023
A short squeeze occurs when traders who have borrowed an asset with the intention of selling it at a lower price, aiming to profit from the price difference, are compelled to repurchase the borrowed assets as market momentum turns against them. This phenomenon often triggers a cascade of buying activity, driving prices upward.
Funding Rates Signal Bullish Sentiment
Despite the heightened shorting activity observed on Deribit and Binance, Bitcoin’s overall funding rate remains firmly in positive territory. Coinglass data indicates that the current funding rate for Bitcoin stands at approximately 0.0036%. This persistent positivity suggests that a significant number of traders continue to bet on an impending price increase, even amidst the backdrop of aggressive short positions.
Source: Coinglass
However, it’s worth noting that long positions have faced a higher risk of liquidation in recent times, primarily due to Bitcoin’s slight decline. On September 20, long liquidations amounted to over $16 million, while short liquidations were approximately $6.7 million.
As of the latest data, long liquidations have decreased to slightly over $7 million, while short liquidations have dwindled to less than $200,000.
Bitcoin halfway to the key $27K territory. Chart: TradingView.com
Positive Funding Rates On Deribit And Binance
Examining the funding rates on Deribit and Binance, it becomes evident that these exchanges also maintain positive funding rates at the time of this writing. This reinforces the notion that despite the prevalence of short positions, traders on these platforms remain optimistic about Bitcoin’s future price action.
As per CoinGecko, the current price of BTC stands at $26,612, reflecting a 1.6% decline over the past 24 hours, while it has managed to secure a modest seven-day gain of 0.4%.
While the crypto landscape remains unpredictable, this development has generated optimism among Bitcoin enthusiasts, who eagerly anticipate whether this short squeeze will indeed catapult BTC beyond the $30,000 threshold.
Featured image from iStock