Bitcoin, the largest cryptocurrency with a market capitalisation of over $1 trillion, has been trading weak for some time now. However, those betting on prolonged weakness of the cryptocurrency could be in for a nasty surprise.
Bitcoin Surge Coming Soon?
According to K33, a research-led digital assets brokerage, Bitcoin may be poised for a sharp uptick soon. The brokerage says that multiple metrics are pointing towards bearish trades on Bitcoin becoming crowded. Therefore, it expects a ‘short squeeze’ in the coming days or weeks.
What’s A Short Squeeze?
A ‘short squeeze’ is basically a situation in which traders, who bet that the price of an asset will decrease by shorting it, are forced to buy the same asset quickly as the prices of the asset start increasing.
Why Does K33 Expect A Short Squeeze
So why does K33 think Bitcoin’s price might increase soon, leading to a ‘short squeeze’? Of all the factors, the primary reason that the brokerage firm is looking at is something called the “funding rate,” which shows how traders are betting on the cryptocurrency’s future price.Right now, this funding rate is the lowest it’s been in about a year and a half. This means that a lot of traders are betting that Bitcoin’s price will go down. However, Vetle Lunde, the author of the K33 report, notes that when many people start betting aggressively, it often leads to those bets running out of steam.This, he believes, ‘makes the situation ripe’ for a short squeeze. Because, once the bearish bets on Bitcoin lose steam and its price starts rising unexpectedly, it will force many of those betting on a price drop to quickly buy Bitcoin to cut their losses. This sudden buying can push the price up even more.
Current Bitcoin Price
At the time of writing this article, Bitcoin was trading at $59,695.40, up almost a per cent. Though on a year-on-year basis it’s up 128.6%, the prices are way below the March 2024 levels, when Bitcoin had surged past the $70,000 mark.
