Bitcoin: If it exceeds $80,000, will $1.4 billion evaporate? Short Squeeze Fear Spreads

▲ Bitcoin (BTC), Short Position/ChatGPT Generated Image

Bitcoin (BTC) is on the verge of reaching the $80,000 mark, threatening large-scale bearish bettors and increasing the possibility of a record short squeeze.

Cryptocurrency media outlet Cointelegraph reported on April 28 (local time) that if Bitcoin's price reaches $80,000, approximately $1.4 billion worth of leveraged short positions are at risk of forced liquidation. According to on-chain data analysis firm CoinGlass, a significant amount of bearish bets has accumulated near the $80,000 mark over the past 48 hours. Bulls are looking for an opportunity to push the price up, leveraging changes in the Federal Reserve's (Fed) monetary policy and inflation concerns to pressure these bearish positions.

Indicators in the futures market suggest that bearish forces may have fallen into a trap. Over the past two weeks, Bitcoin perpetual futures funding rates have mostly been negative, indicating widespread conviction in a price decline. However, as the price rebounded from $72,000 to $78,000, a significant number of bearish positions entered a loss-making territory. If the price breaks through the $80,000 resistance level, a cascade of forced liquidations of bearish positions is expected, leading to a short squeeze that further accelerates price increases.

The macroeconomic environment is also turning favorable for bulls. With Brent crude oil prices recovering to the $100 per barrel mark, stimulating inflation expectations, the likelihood of the Fed adopting an accommodative policy has increased. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability of an interest rate cut in September has risen to 20%. As the attractiveness of government bond yields diminishes, funds are shifting to risk assets like Bitcoin.

Strong buying pressure in the spot market is firmly supporting Bitcoin's price floor. Strategy acquired an additional $255 million worth of Bitcoin between April 20 and 26, and US Bitcoin spot ETFs also saw a net inflow of $824 million during the week. Despite the price failing to break through $79,000, spot buyers are undeterred and continue to accumulate.

The sentiment in the options market remains cautious. Deribit's Bitcoin options delta skew recorded 11%, indicating that the cost of downside protection is higher. This is evidence that whale investors and market makers are wary of downside risks. However, if spot demand continues and the Fed's policy stance becomes more flexible, the current downside caution could ironically act as a powerful bull trap, leading to a strong upward movement.

Whether Bitcoin can break through the strong resistance level of $80,000 is the market's biggest focus this week. The robust demand in the spot market and the liquidation pressure on short positions in the futures market are combining, setting the stage for a liquidity squeeze. If the forced liquidation of bearish positions acts as a catalyst, Bitcoin's price could surge beyond market expectations.

*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.*