Will Bitcoin’s potential short squeeze help BTC escape the $ 20K trap
Bitcoin, the largest cryptocurrency, showed some important signs of life after a $ 20k consolidation phase. Although the efforts were not enough when liquidations around the crypto market were intensified. Data on the chain show that Bitcoin financing rates have fallen into deep negative values. This can pave the way for a potential short squeeze, and thus affect BTC’s price.
Ace-squeeze me?
Bitcoin financing rates continued to show a gloomy scenario as the calculation fell into a deep negative value. This may include or rather pave the way for a brief squeeze in the market.
The financing rate measures the periodic fee that Bitcoin futures’ long and short traders exchange between each other. At the moment there are several shorts in the market, ergo the general feeling is bearish. It is clear that futures traders are accumulating shorts in the market.
Source: CryptoQuant
Can this help BTC escape the $ 20k trap? Well, as pointed out by a CryptoQuant analyst, BTC may see a slight boost in the short term due to current funding rates.
A similar pattern can be seen above in the chart where the funding rate reached an alarmingly low level. There, the price turned sharply upwards and caused a short squeeze, which further intensified the price fluctuation.
A short squeeze occurs when mass liquidations of short traders take place due to a sudden sharp fluctuation in the price.
Especially during the last 24 hours, 24,160 traders were wound up, and the total windings came in at $ 79.26 million. On July 2, the crypto market recorded more than $ 250 million in liquidation as losses that have increased across other cryptocurrencies. At the time of going to press, the statistics stood at around $ 79.55 million.
Source: CoinGlass
Needless to say, the coin led the charge according to data from Coinglass. Comparing the two trends above, it is possible that a fluctuation in the price may lead to a squeeze, thus bringing some relief.
What to expect?
BTC’s price action has squeezed in at $ 18- $ 21k over the past two weeks. June saw red signals in both markets – spot at -30% while derivatives at -11%.
Source: Glassnode
The entire financial market is now eagerly awaiting the Fed’s response to inflationary pressures. In any case, one thing is clear – BTC holders, whether small or large, continue to support the largest cryptocurrency.
At press time, adresses that hold <1 BTC added to balance in 2022 at a remarkable pace. Interestingly, since January, they (small owners) have added 113,884 BTC.
