Crypto short squeeze lifts prices as Bitcoin outperforms USD
Short squeeze sweeps top 500 cryptocurrencies as traders cover bearish bets
News
Cryptocurrency markets recorded their largest short squeeze since the early October sell-off, as a price rebound prompted bearish traders to close positions and raised expectations for a broader recovery.
Short liquidations across crypto futures and perpetual contracts reached about $200 million on Wednesday, the highest since roughly $1 billion in short positions were erased during October’s market crash, according to data from analytics firm Glassnode. It was the biggest short liquidation event across the 500 largest cryptocurrencies since the Oct. 10 decline, Glassnode said.
Investor sentiment has also improved, with market gauges indicating a shift from fear to greed for the first time since early October.
A short squeeze occurs when an asset’s price rises sharply, forcing short sellers to buy back the asset to limit losses, which can accelerate the move higher.
Source: Glassnode
Bitcoin (BTC) saw the largest share of liquidations, with $71 million in shorts closed over the past 24 hours. Ether (ETH) followed with $43 million, and privacy token Dash (DASH) had $24 million in shorts liquidated, according to Glassnode’s dashboard.
Geopolitics seen aiding recovery
Some analysts pointed to early signs of market stabilization as Bitcoin began to outperform the US dollar amid questions around the Federal Reserve’s independence and broader geopolitical tensions.
Nicolai Sondergaard, research analyst at crypto intelligence firm Nansen, said rising geopolitical volatility can act as a structural tailwind for Bitcoin’s role as a reserve asset. While precious metals remain the primary beneficiaries in such periods, Bitcoin is increasingly part of the discussion as an alternative reserve asset and could benefit, albeit to a lesser extent, he said.
BTC&DXY, year-to-date chart. Source: Cointelegraph/TradingView
Year to date, Bitcoin’s price has risen 10.6%, while the US Dollar Index (DXY) has gained 0.75%, according to TradingView.
Analysts at crypto exchange Bitunix added that policy-related risks could introduce a “risk premia” for BTC, which may influence market dynamics.
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