What a short squeeze means for Bitcoin’s price

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Bitcoin’s price has rebounded from the correction that followed the new ATH and the asset is now trading close to $48000, well on track for price discovery beyond the ATH. As the price continues rallying, a total of $602 Million worth of Bitcoin short positions got liquidated in the aftermath of the Tesla news. If this is combined with the shorts that got liquidated in the aftermath of Elon Musk’s Bitcoin tweet, then a total of $1.2 Billion shorts have been liquidated on events that can be attributed to Musk. This short squeeze has had an impact on the sentiment and in turn on the trade volume on spot and derivatives exchanges and has resulted in a drop in the funding rate.

Source: Twitter

Based on the following chart, the higher the funding rate, the hotter the market. However, the more saturated the market is the lesser room for vertical growth in price. The chart suggests that post the short squeeze on Bitcoin’s long and short positions, the funding rate is now well below what it was when the price hit $48000, and if nothing else, this leaves room for vertical growth in Bitcoin’s price.

In contrast to this, the options market continues to remain uninspired and uneventful with 36 contracts changing hands on CME Bitcoin options. Besides, the Bitcoin to Fiat trading volumes and demand…

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