Bitcoin short squeeze poised as BTC dropped to $58,000 on Thursday. The asset started the U.S. session with a fast 5% plunge to its weakest level since 2024.
Consequently, the largest cryptocurrency has since bounced to $59,440, down 2.51% over the last 24hrs, ETH down 5.5% on over the 24hrs. Solana posted similar declines.
Why Bitcoin short squeeze poised to trigger
The move came as memory chip maker Micron soared following strong earnings Wednesday evening. Nevertheless, much of the rest of mega‑cap tech fell, leaving the Nasdaq down 0.4%.
Markets continue to digest not only the capital demands of the AI boom but the Fed’s surprisingly hawkish turn last week under new Chairman Kevin Warsh. Specifically, policymakers signaled that their next move is almost surely going to be a rate hike rather than a rate cut. Furthermore, that hike could come far sooner than markets had previously expected.
Derivatives data points to short squeeze
While bitcoin remains in a sharp downtrend dating back to October, derivatives data points toward some short‑term relief. Specifically, the liquidation heatmap shows a bulk of clustered liquidation risk above current prices, not below. Therefore, a move to the downside is unlikely to amplify through forced selling. Conversely, the real danger is for those positioned short.
Open interest has risen roughly 0.28% over the past 24 hours, even as price fell by around 3%. This signals that traders are not closing their shorts. Instead, they are doubling down and betting on a breach of the $58,000 level of support. Additionally, funding rates are negative, another sign that the market is paying a premium for downside exposure.
Spot market depth reinforces bullish skew
Spot market depth reinforces strength beneath a delicate surface. Specifically, CoinGlass data shows a total of 6,900 BTC ($409 million) sitting in bids on the order book between the current price and $50,000. Meanwhile, there are just 1,570 BTC ($93million) in resting sell orders between the current price and $70,000. Therefore, this creates a bullish skew in terms of supply.
Typically, in scenarios like this, when a clearly overcrowded trade appears, astute traders and market makers will target that weakness. Consequently, they will move the price in the other direction. This could lead to those in shorts closing their positions to avoid paying funding and prevent liquidation.
