With less than a week until the Fed’s interest rate decision, Bitcoin investors are speculating, with more than $6 billion in positions at risk of liquidation.
According to data from CoinGlass, a mere 3% rise in Bitcoin to $96,250 would result in the liquidation of nearly $3 billion in short positions. On the other hand, if Bitcoin were to fall by 4.54% to $89,209, the $3.52 billion long position would be wiped out.
“Cryptocurrencies are facing strong resistance to upside, and market participants remain in a bearish mindset, leaving the market highly vulnerable,” said Adam Chu, principal researcher at options analysis firm GreekLive. decryption yesterday.
Bitcoin is currently trading at $93,800, according to data from CoinGecko, and after a volatile start to the month, it has gained 1% in 24 hours and nearly 4% in the last week.
Bond traders are nearly 90% pricing in a quarter-point rate cut, and a potential price increase could trigger a short squeeze that could push Bitcoin closer to the key psychological level of $100,000.
A short squeeze occurs when the price moves against investors’ bearish bets, forcing them to cover their positions with purchases and accelerating the uptrend in the underlying asset.
Current market conditions are creating a high-stakes tug-of-war ahead of the Fed’s decision, with underlying market vulnerabilities potentially amplifying the impact of the central bank’s policy signals.
However, a closer look at the derivatives data reveals a more nuanced picture.
Open interest in Bitcoin derivatives contracts has steadily declined since November 21, even as the cumulative volume delta of perpetual contracts has increased, a pattern that suggests traders are short covering, the researchers said. Vero data.
In other words, the data suggests that Bitcoin is not rising because traders are not getting bullish. Instead, prices may be pushing up as short sellers close out positions while spot buying remains weak.
Still, the funding rate and Coinbase premium metrics that help determine investor positioning and spot purchase demand remain undetermined and do not show any particular directional bias.
A continued rise in spot cumulative volume delta and open interest is likely required for an uptrend to activate.
Meanwhile, spot and permanent order book depth of up to 10% has turned negative since December 2 as traders remain reluctant to push prices higher.
“At this stage, a short squeeze looks more likely than a long squeeze,” said Ryan Lee, chief analyst at Bigget. Decrypt. “Institutional investor inflows remain steady, regulatory signals are trending constructive, and sentiment is gradually turning risk-on.”