- BTC saw the largest volume of short liquidations in almost two years.
- BTC has fallen below the $70,000 price zone.
Bitcoin [BTC] is poised for a pivotal year in 2024, which may see history being written or past trends repeated. Recently, the price surge caused the largest short squeeze since 2022, leading to a significant increase in Open Interest volume.
Although the price has fallen since then, this could be a sign of another big step forward.
Bitcoin beats short traders
Like a boxing match, Bitcoin and the market will go head-to-head in the ring. Many onlookers bet that Bitcoin would emerge victorious, but the reverse saw them counting their losses.
This scenario played out recently when a rise in the price of BTC led to a massive liquidation of short positions. According to CryptoQuantBy the end of trading on May 20, more than $259 million in short positions had been wiped out.
This event, known as a short squeeze, occurs when the price of an asset rises sharply, forcing traders who had bet on a price drop to close out their positions. This was the largest liquidation of short contracts since 2022, according to data.
Source: CryptoQuant
In a short sale, traders borrow shares of an asset, expecting its price to fall, so they can buy it back at a lower price, return the shares and pocket the difference.
If the price rises instead, they have to buy back the shares at a higher price, causing them to incur a loss. This is what happened to Bitcoin, causing the volume of its Open Interest to increase.
Bitcoin Open Interest Rises
An Analysis of Bitcoin Open Interest on Mint glass indicates significant recent cash inflows.
One effect of short liquidations is that closing positions prompts more buyers to create new positions, causing additional money to flow into the asset, in this case Bitcoin, and increasing Open Interest.
Source: Coinglass
At this time, BTC Open Interest stood at $35 billion. Despite the price of BTC falling below $70,000 over the past 24 hours, Open Interest has continued to rise.
This suggests that more traders are still betting on a new price rise, in addition to unwinding short positions.
How BTC has developed
According to AMBcrypto’s analysis of Bitcoin on a daily time frame, BTC fell from the $71,000 range at the end of trading on May 21. The chart indicated a decline of about 1.8%, bringing the price to about $70,142.
Source: TradingView
Read Bitcoin (BTC) Price Prediction 2024-25
At the time of writing, BTC was trading at around $69,830, reflecting a decline of less than 1%. Short sellers may see this as an opportunity to bet against Bitcoin, but many will still observe the trend.
BTC has managed to rise above its short-term moving average (yellow line), turning it into support around $66,000. If this support holds, BTC could soon test the $75,000 price zone.