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Bitcoin: Technical Indicators Improving at $59K May Trigger Short Squeeze

Aug 21, 2024
  1. Technical Indicators and RSI
  2. Open Interest and Negative Funding Rates
  3. Traders' Reaction and Potential Outcomes

Several popular Bitcoin trading metrics are flashing positive, which may force traders to act quickly and cover their positions if macroeconomic events align, according to a crypto analyst.

Technical Indicators and RSI

One of the key metrics that caught Markus Thielen's eye, head of research at 10x Research, as a sign of improvement is Bitcoin’s relative strength index (RSI) “bottoming out” — which measures the speed and change of its price movements to identify overbought or oversold conditions. Bitcoin’s RSI score is currently 61.13 out of a total possible score of 100 and is down 8% since July 21, according to Bitbo data.

Open Interest and Negative Funding Rates

Thielen told Cointelegraph that the increase in Bitcoin Open Interest (OI) — the total number of Bitcoin futures contracts that have yet to be settled or expire — while the “market went down” on Aug. 5 indicates “more short positioning,” which is also indicated by the negative funding rate. OI is up 13.62% since Aug. 6, the day after Bitcoin fell to $49,842, its first drop below $50,000 since February, per CoinGlass data.

Traders' Reaction and Potential Outcomes

More future traders are appearing more optimistic about a Bitcoin price upswing from its current price of $59,391. The put-to-call volume ratio, measuring the demand for sell versus buy options, stands at 66.33% calls and 33.67% puts, resulting in a put-to-call ratio of 0.51. “A massive Bitcoin short squeeze will be inevitable,” pseudonymous crypto trader Mister Crypto said.

Thielen explained he doesn’t think the market is “massively short” but short traders may be “forced to cover” on the back of “better election odds” for Donald Trump ahead of the United States presidential election in November.

He believes the market is at a tipping point, highly anticipating the United States Federal Reserve’s decision on whether to cut interest rates. “Such a message could trigger a rally in the stock market, with Bitcoin likely following suit,” he declared.

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