Bitcoin returns to $42K as bets start favoring 'short squeeze' higher for BTC

Bitcoin (BTC) broke done $42,000 connected Jan. 11 arsenic expectations of a caller "short squeeze" mounted.

BTC/USD 1-hour candle illustration (Bitstamp). Source: TradingView

Short-term compression "reasonably likely"

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD arsenic it recovered from Monday's dip to $39,600 — its first breach of the $40,000 people since September.

While short-term bullish prognoses were conspicuously absent connected the day, attraction focused connected the imaginable for derivatives markets to spark different "short squeeze."

With unfastened involvement adjacent all-time highs contempt the downturn and sentiment intelligibly favoring further downside, a astonishment uptick could person the interaction of "squeezing" abbreviated positions and providing immoderate alleviation for bulls.

As on-chain analytics steadfast Glassnode noted successful the latest variation of its play newsletter, The Week Onchain, specified an lawsuit is overdue. Longs person suffered almost constantly since November's $69,000 all-time highs, and "squeezes" further hap erstwhile the marketplace slightest expects a definite outcome.

"Short traders, who person not been punished for taking connected expanding risk, whitethorn find themselves candidates for a near-term squeeze," researchers forecast.

Such an lawsuit could good beryllium amplified acknowledgment to "tepid" request for spot BTC and futures unfastened involvement leverage which is approaching 2% of the Bitcoin marketplace cap, Glassnode continued.

"Alongside precise oversold indicators successful on-chain spending activity, this suggests a abbreviated compression is really a reasonably apt near-term solution for the market," the newsletter concluded.

Bitcoin futures unfastened involvement leverage ratio annotated chart. Source: Glassnode

For each short, there's a long

Analysts meantime considered alternatives to the precocious unfastened involvement being removed via different limb down towards $30,000.

Related: ‘Most bullish macro backdrop successful 75 years’ — 5 things to ticker successful Bitcoin this week

Despite nary "wipeout" of unfastened involvement yet occurring, a astonishment upside determination could yet beryllium the lawsuit that resets marketplace composition, fashionable Twitter relationship Credible Crypto argued connected the day.

"What if the large OI wipeout everyone is looking for ends up happening due to the fact that of a compression to the upside alternatively than a determination further down?" helium quizzed successful effect to information from chap expert William Clemente.

"Happened successful August ‘21 arsenic we moved disconnected the 30K bottom. Think we probs spot that play retired again. Bears bout to beryllium wiped clean."

Bitcoin futures unfastened involvement illustration (Binance). Source: Coinglass

As Cointelegraph reported, $40,000 forms a significant terms zone from aggregate points implicit the past 12 months.