Bitcoin Nears All-Time High, But Surge in Shorts Could Trigger a Short Squeeze

In Brief:

Bitcoin broke past $110,000, but the market sentiment is turning bearish as short positions grow.

A short squeeze is possible if BTC breaks its all-time high, forcing liquidations from overly bearish traders.

Bitcoin is inching toward a new all-time high, recently surpassing $110,000, yet market sentiment remains unexpectedly bearish. According to Coindesk analyst Oliver Knight, the long-short ratio has fallen sharply from 1.223 to 0.858, signaling that more traders are betting against BTC in the short term.

Data reveals that short positions in open interest have increased from $32 billion to $35 billion, indicating a significant rise in bearish bets despite the bullish price action. This suggests a disconnect between market performance and trader sentiment, as confidence in Bitcoin’s continued momentum appears to be weakening.

Traders are currently employing short-term arbitrage strategies within the $100,000–$110,000 price range, with technical indicators such as RSI showing bearish divergence. This may reflect growing caution after Bitcoin’s strong performance in the second quarter.

However, the surge in short positions could ironically set the stage for a short squeeze. If Bitcoin decisively breaks its historical high, it could trigger a wave of forced liquidations and stop-loss orders among bearish traders, rapidly pushing the price higher as buying pressure intensifies.

This dynamic is not uncommon in crypto markets, especially when excessive pessimism builds up just before a major breakout. Analysts caution that volatility could increase significantly in the coming days.

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