Bitcoin Dips Below $60,000, Short Squeeze Risk Rises, US Government Another Threat?

Bitcoin Dips Below $60,000, Short Squeeze Risk Rises, US Government Another Threat?While global equities continue their rally, the cryptocurrency market remains subdued, with Bitcoin falling over 12% in the past month, now dipping below the $60,000 mark. However, crypto analytics firm K33Research suggests that the Bitcoin derivatives market shows a rising risk of a "short squeeze," potentially leading to a strong rebound for Bitcoin

Bitcoin Dips Below $60,000, Short Squeeze Risk Rises, US Government Another Threat?

While global equities continue their rally, the cryptocurrency market remains subdued, with Bitcoin falling over 12% in the past month, now dipping below the $60,000 mark. However, crypto analytics firm K33Research suggests that the Bitcoin derivatives market shows a rising risk of a "short squeeze," potentially leading to a strong rebound for Bitcoin.

K33Research believes that Bitcoin perpetual futures funding rates are an important indicator of market sentiment. The seven-day average annualized rate fell to its lowest level since March 2023 in the week ending August 20, reflecting strong bearish sentiment. K33 also notes that over the past week, the nominal open interest in the perpetual contract market increased by almost 29,000 Bitcoin.

According to data from HODL15Capital on August 19th, Bitcoin short selling volume across major crypto exchanges doubled to $18.3 billion, with Ethereum leveraged shorting also surging. K33 analysts Vetle Lunde and David Zimmerman stated in a report: "The recent average negative funding rate in perpetual swaps, alongside the significant increase in open interest, indicates aggressive short selling in the market. This structural change could trigger a short squeeze."

Short squeezes typically occur when prices unexpectedly rise, forcing bearish traders to cover their positions, further driving prices up.

Despite global equities rebounding to record highs, shaking off concerns about US economic growth, and gold hitting new historical highs, Bitcoin and the broader cryptocurrency market saw significant declines in August. To date, Bitcoin has dropped over 12% for the month, lagging far behind the MSCI Global Stock Index's nearly 1% gain. Currently, Bitcoin has fallen below $60,000, trading at $59,695.40.

Furthermore, some analysts point to the US government as another potential challenge for the crypto market. Data from ArkhamIntelligence shows that the US government recently transferred $600 million worth of seized Bitcoin to an exchange wallet run by Coinbase Global. Khushboo Khullar, venture partner at Lightning Ventures, believes that the US government might sell these Bitcoins, leading to a temporary price decline.

Overall, while the Bitcoin derivatives market suggests the potential for a short squeeze, the US government's stance on cryptocurrencies and overall market sentiment remain key factors influencing Bitcoin's price. Investors should closely monitor these factors for better understanding of market trends.