Bitcoin is approaching a powder keg of shorts that could send its price rocketing to a new all-time high.
Data from Coinglass shows a massive $3.1 billion in short interest stacked at the $100,000 price level. That‘s just slightly above Bitcoin‘s high of $97,000 on Friday.
Should Bitcoin‘s price climb beyond $100,000, it would liquidate those shorts and trigger a feedback loop of aggressive buys. That scenario is called a short squeeze as bearish bets implode and short sellers are forced to buy back at higher prices, which pushes Bitcoin upwards.
At least that‘s what happened in November when Bitcoin surged to $76,000 and met a cluster of shorts worth $1 billion at that price mark. The short squeeze that happened pushed Bitcoin to $81,000, and that rally culminated in an all-time high of $108,000 in December.
Bitcoin is up 15% in the last two weeks amid a resurgence in investor optimism. Investor confidence has been boosted by signs of Bitcoin decoupling from so-called risk-on assets like US technology stocks.
Robbie Mitchnick, BlackRock’s digital asset chief, told DL News that Bitcoin will become even more interesting to investors if it breaks free of its tight correlation to the stock market.
Bernstein analysts said it‘s “hard to be bearish” about Bitcoin.
Standard Chartered digital asset research chief Geoff Kendrick predicted that Bitcoin will top $120,000 before the end of the quarter.
Kendrick also said investors rotating out of gold to Bitcoin was also driving the cryptocurrency’s price rally.
Arthur Hayes, chief investment officer at Maelstrom, last month said Bitcoin‘s slump to $74,500 marked its price bottom and that it had entered its “up-only” era. Hayes sees Bitcoin reaching $200,000 this year.
Institutional demand via inflows into spot Bitcoin exchange-traded funds has also exploded after months of muted interest. Data from UK crypto fund Farside Investors shows more than $4 billion in investor flows into Bitcoin ETFs in the US in two weeks.
Samara Cohen, BlackRock’s chief investment officer for ETF and index investments, said institutional investors are mostly focused on Bitcoin.
BlackRock is the issuer of the biggest Bitcoin ETF in the US with $58 billion in assets under management.
Still, some analysts have thrown up caution signs, pointing to weakening demand amid signs of buyer exhaustion and profit-taking. Data from Glassnode shows that selling volume on Bitcoin currently outweighs demand for the asset.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at [email protected].
