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▲ Bitcoin (BTC) / ChatGPT generated image
As Bitcoin (BTC) moves within a descending channel that began on May 6, the possibility of a short squeeze targeting short position liquidations has emerged following remarks by US President Donald Trump regarding the Iran war.
BeInCrypto reported on May 21 (local time) that Bitcoin is hovering around $77,808 within a descending channel, and with short liquidation volumes accumulating above the current price, breaking above $80,889 has become a key turning point for the short-term trend.
On May 20, Trump made remarks suggesting a swift end to the Iran war, which was followed by an initial wave of short liquidations in the cryptocurrency market. Approximately $184.59 million worth of short positions were liquidated in the past 24 hours, with Bitcoin-USDT short positions accounting for the largest share.
On May 18, Bitcoin attempted to break out of the lower trendline of the descending channel but was immediately met with buying pressure, leading to a 2.82% rebound. However, analysis suggested that trading volume was weak during the 8-hour candle rebound, indicating some profit-taking as the price approached the upper part of the channel.
Joao Wedson, CEO of Alphractal, presented a leverage map around Bitcoin, analyzing that approximately $9.35 billion in potential short liquidation volume is located above the current price, while approximately $12.73 billion in long position liquidation volume is below it. Wedson stated, “Bitcoin is entering a phase where the market needs to reveal its true direction.”
Similar structures were observed in Binance BTC/USDT perpetual futures data. As of the last 7 days, cumulative short liquidation leverage was $2.16 billion, which was greater than the cumulative long position liquidation leverage of $1.28 billion. Short leverage was approximately 1.7 times higher than long positions, with a significant portion of the volume concentrated above the current price.
Long-term holder movements also aligned with the short-term liquidation structure. Glassnode's Bitcoin Holder Net Position Change metric has been rising since early May. This metric measures the monthly change in the supply held by long-term holders. On May 4, the metric was 22,365 BTC, and by May 20, it had increased to 29,782 BTC, a 33.2% rise in just over two weeks. This was interpreted as an accumulation signal, as long-term holders increased their holdings while the price showed weakness.
BeInCrypto analyzed that in traditional financial markets, the impact of a peace agreement with Iran takes time to translate into oil prices, inflation, Federal Reserve policy expectations, stock markets, and emerging market capital flows. In contrast, Bitcoin's price movements could appear sooner because leverage has already accumulated in perpetual futures and long-term holders are increasing their holdings.
At the technical price levels, the 100-period exponential moving average on the 8-hour chart was located at $77,685, and Bitcoin traded above this line. The immediate resistance levels were presented as the 20-period exponential moving average at $77,911 and the 50-period exponential moving average at $78,529. Analysis suggests that a decisive break above the 50-period exponential moving average would open the path towards the upper trendline of the descending channel.
The key trigger zone was identified as $80,889, where the Fibonacci 0.618 retracement level is located. For Bitcoin to break this price, it needs to rise by approximately 4% from the current price, and breaking past this zone could trigger a domino effect of short liquidations. The next major target was presented as the Fibonacci 1.0 retracement level at $83,914, which also aligned with the short concentration zone between $83,109 and $84,131 mentioned by Alphractal.
In the downward direction, the Fibonacci 0.236 retracement level at $77,864 and the defense of the channel low at $75,995 were cited as important price levels. A break below $75,995 would allow the descending channel structure to regain strength, exposing the 200-period exponential moving average at $76,327. BeInCrypto analyzed that a descending channel does not automatically lead to a bullish breakout, and confirmation by trading volume is required for a breakout.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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