Bitcoin's rise above $75,000 faces skepticism from traders, with risks of a short squeeze as bearish sentiment lingers in the futures market.
Bitcoin's recent surge past $75,000 has raised concerns among margin traders, who are skeptical about its sustainability, as reported by Bloomberg. The perpetual futures market has seen negative funding rates for 46 consecutive days, indicating a prolonged bearish sentiment reminiscent of the aftermath of the FTX collapse in late 2022.
Analysts highlight a notable disconnect between rising spot prices and the prevailing pessimism in futures trading, which could lead to significant liquidations if prices continue to climb. This could trigger a short squeeze, forcing short sellers to close their positions, potentially resulting in a sharp increase in prices. Vetle Lunde, head of research at K33, noted that "traders are actively increasing short positions, betting against a breakout," which increases the likelihood of a short squeeze should upward momentum persist.
Market Support Factors
Despite the doubts from traders, Bitcoin has rebounded approximately 11% from its lows in April, bolstered by several fundamental factors:
- Increased Capital Inflow: American spot Bitcoin ETFs are witnessing positive inflows.
- Institutional Buying: Michael Saylor's company, Strategy, has invested $2.6 billion in Bitcoin over the past two weeks, significantly impacting the market.
- Wall Street Developments: Charles Schwab has initiated spot crypto trading, allowing for a substantial portfolio allocation to Bitcoin, while Morgan Stanley has launched an ETF focused on the cryptocurrency.
Experts caution that the influx of positive news could put short positions at risk, with the potential for a volatility surge if key price levels are breached. Kaiko analyst Lawrence Fraussen mentioned that "a breakout above $76,000 could push BTC to $85,000, catching many off guard."
Potential Resistance and Risks
Although Bitcoin is on an upward trajectory, bears still have opportunities for profit if the trend falters. Options market data from Deribit shows that traders are willing to pay high premiums for protection against declines, with significant open interest in put contracts at $60,000 and $50,000 strike prices. As Bitcoin continues its ascent, it may encounter strong resistance, particularly as options dealers employing market-neutral strategies are selling the asset during price increases, with large positions concentrated around the $80,000 mark.
Currently, Bitcoin is trading at approximately $75,500, still 40% below its all-time high of around $126,000 reached in October. Analysts at CryptoQuant have also flagged the risk of widespread profit-taking in the cryptocurrency market.
