The Bitcoin rally continues as the cryptocurrency smashes all resistance levels and seems ready to reclaim more ground. The number one crypto by market capitalization has seen a double-digit gain over the previous week leading the top performers in the sector.
As of this writing, Bitcoin traded at $21,400 with sideways movement in the last 24 hours. The BTC price records a 23% rally in the previous seven days. Other cryptocurrencies in the top 10 record similar price action with Ethereum (19%) and Polygon (18%).
The crypto has seen some losses but could recover during today’s trading session.
Bitcoin Shorts Are Wipeout, Bear Market Over?
Any “good” price rally must be a “hated” rally; Bitcoin follows this rule. As the cryptocurrency trended to the upside from its yearly lows, crypto traders began shorting it with overleverage positions.
When Bitcoin was about to breach $17,500, the price action went sideways, allowing overleverage shorts to take positions; these traders were expecting BTC to fail the re-test of this resistance level. Their positions provided liquidity to the upside and the fuel to send Bitcoin to its current levels.
According to a report from Bitfinex, $450 million were recorded in short liquidations as BTC began its ascend. This data represents the most significant short squeeze since July 2021 across the crypto market, as seen in the chart below.
The BTC price action is displaying a similar behavior; it’s moving sideways as shorts pile in, expecting to profit from another crash. Their positions could still provide fuel for this rally, but the report warns about long traders going greedy, expecting further appreciation:
It is typical for bear markets to have a complete wipeout of shorts (…). even with the leg up, the market remains highly illiquid, and with the sharp fall in Open Interest over the weekend, a pullback might be expected with a cautious approach from bulls.
Some Room To Run
Additional data from a pseudonym analyst indicates that Open Interest, the number of total positions for the derivatives sector, is still skewed to the short side. Thus, traders could see more short-term appreciation before Bitcoin and Ethereum record a pullback.
In this scenario, the $19,600 and $19,700 areas have confluence with the 200-day simple moving average and the liquidity of long positions using 50x leverage or more. In other words, these levels should operate as critical support if BTC begins retracing its gains.
As seen in the chart above, $19,600 is crucial if Bitcoin continues to crash.