Bitcoin returns to $ 42K when bets begin to favor “short squeeze” higher for BTC

Bitcoin (BTC) broke through $ 42,000 on January 11 when expectations of a new “short squeeze” increased.

BTC / USD 1-hour light chart (bit stamp). Source: TradingView

Short-term hug “reasonably likely”

Data from Cointelegraph Markets Pro and TradingView followed BTC / USD as they recovered to $ 39,600 after Monday’s fall – the first break of the $ 40,000 mark since September.

While short-term bullish forecasts were conspicuously absent on the day, attention focused on the potential for derivatives markets to trigger another “short squeeze”[ads1];.

With open interest near all-time highs despite the decline and sentiment that clearly favors further downside, a surprising upturn may have the effect of “squeezing” short positions and providing some relief for bulls.

As the chain analysis company Glassnode noted in the latest issue of its weekly newsletter, “The Week On-Chain”, such an event is delayed. Longs has suffered almost constantly since November’s $ 69,000 all-time highs, and “squeeze” occurs further when the market least expects a certain outcome.

“Short traders, who have not been punished for taking increasing risks, may find themselves candidates for a short-term hug,” researchers predicted.

Such an event may well be amplified thanks to “lukewarm” demand for spot BTC and futures open interest rate influence, which is approaching 2% of Bitcoin’s market value, Glassnode continued.

“Together with highly oversold indicators of consumer activity in the chain, this suggests that a short squeeze is in fact a reasonably likely short-term solution for the market,” the newsletter concluded.

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

For each short, there is a long

Analysts, meanwhile, are considering alternatives to the high open interest that was removed via another leg down to $ 30,000.

Related: ‘Most bullish macro background in 75 years’ – 5 things to see in Bitcoin this week

Despite the fact that no “eradication” of open interest has yet taken place, a surprising upside may still be the event that resets the market composition, the popular Twitter account Credible Crypto claimed on the day.

“What if the big OI rash everyone is looking for ends up happening due to a squeeze on the upside instead of a move further down?” he asked in response to data from co-analyst William Clemente.

¬ęShot in August ’21 when we moved from the 30K bottom. Do we think probs will see it play out again. Bears must be wiped clean. “

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

As the Cointelegraph reported, $ 40,000 has formed a significant price zone from several points over the past 12 months.