Bitcoin (BTC) traders are aggressively shorting the digital currency on prominent exchanges like Deribit and Binance, according to observations by onchain analytics firm U.Today. Despite this selling pressure, there’s a silver lining in the form of potential liquidations that could bolster prices. Santiment, a notable crypto data provider, suggests that as traders continue to bet against Bitcoin’s value, the likelihood of a rebound to $30,000 becomes increasingly plausible.
The potential liquidation of excessive short positions could pave the way for a short squeeze, a situation where a cryptocurrency’s price rises instead of falling when numerous traders are betting against it. This phenomenon has played a role in recent BTC price surges. Santiment reports that Bitcoin has seen an approximately 4% increase in value since the surge in shorting activity began last week and anticipates that this trend could persist.
At the time of writing, Bitcoin is down by 1.70% in the last 24 hours, trading at $26,766. The cryptocurrency market’s decline follows the recent Federal Reserve interest rate decision, which kept rates steady but left room for potential future hikes. In the wake of this decision, the S&P 500 index reached four-week lows.
While Bitcoin aims to surpass the critical $27,500 mark, a crypto analyst highlights an intriguing trend that has influenced BTC’s price movements in recent months. The analyst notes that since mid-April, whenever the Relative Strength Index (RSI) on the 4-hour chart reaches 73.31, Bitcoin’s price experiences a retracement. This pattern appears to be repeating as BTC approaches a declining resistance trendline at $27,440. The analyst, known as Ali, suggests that further downward movement could take Bitcoin to $25,200 or lower, potentially creating a ‘buy the dip’ opportunity for investors. Traders are advised to monitor a 4-hour candlestick close above $27,440, as this could signal the start of a bullish trend.
Meanwhile, on-chain activity for Bitcoin is currently at levels not seen since April. Glassnode, an onchain analytics firm, reports that the Bitcoin mempool has not cleared since mid-April. This surge in demand for blockspace is somewhat unusual, with indicators pointing to high activity but cyclically low transfer volumes. According to Glassnode’s analyst, inscriptions on the blockchain may have contributed to mempool congestion.
