Bitcoin (BTC), the world’s largest cryptocurrency by market cap, is showing signs of life after a rocky period on the charts. At press time, BTC was trading at $57,110, marking a 4.27% gain over the last 24 hours. With a notable increase in trading volume of 53.38%, bringing the daily total to $33.57 billion, market analysts are beginning to show cautious optimism.
However, despite this recent uptick, BTC is still down significantly from its all-time high (ATH) of $65,103, sitting 22.8% below that peak. This modest recovery comes on the heels of a difficult month, where Bitcoin plunged by 6.54%, leaving investors wondering if this price rally can sustain itself.
Market Sentiment – What The Analysts Are Saying
Market sentiment appears to be divided. On one hand, the price surge and increased market cap — now at $1.13 trillion — are promising. But Santiment’s latest analysis reveals an interesting dynamic: over the last four days, traders on major exchanges like Binance and BitMEX have been heavily shorting Bitcoin.
This shorting activity, in which traders borrow BTC to sell it, betting on a price decline, reflects a broader lack of confidence in the market’s direction. Fear, uncertainty, and doubt (FUD) seem to be driving many investors’ decisions. As more traders expect a downturn, they’ve positioned themselves to profit from Bitcoin’s fall. However, if prices rise instead of falling, these short sellers could be forced into what’s known as a “short squeeze.”
The Short Squeeze Effect
A short squeeze occurs when short sellers are compelled to buy back the BTC they borrowed, due to rising prices that threaten to deepen their losses. This forced buying creates an upward pressure on Bitcoin’s price, amplifying gains in a short period. The 4.27% gain BTC saw in the last 24 hours is a likely indicator of this effect, as short positions were liquidated to mitigate further losses.
Santiment’s data suggests that this volatility is here to stay for now. Historically, September has been a volatile month for Bitcoin, and with BTC’s 30-day volatility spiking by 70%, that trend seems to be continuing. Implied volatility — particularly for short-term options — has also surged by 60% since the start of the month.
Key Factors Fueling Uncertainty
Beyond market mechanics, external factors are contributing to Bitcoin’s uncertain trajectory. The upcoming U.S. presidential election is a major source of uncertainty for investors, with many cautious about how potential policy shifts could impact the crypto market. Additionally, the Long-Term Holder SOPR (Spent Output Profit Ratio), a key metric for understanding selling pressure, has jumped from 1.4 to 2.0, indicating that long-term investors are increasingly looking to sell at current levels.
Also Read: Goldman Sachs Predicts No Bear Market In Stocks, But 65% Chance Bitcoin Falls Below $40K
Despite the gains, Bitcoin faces stiff resistance at $59,363. If FUD continues to dominate, it could result in a pullback as traders rush to realize their profits. But if the market can push through this key resistance level, BTC could cross the $60,000 mark, signaling a more sustained recovery.
The coming weeks will be crucial for determining whether Bitcoin can maintain its upward momentum or if another correction is on the horizon. Investors are advised to tread carefully as volatility remains high, and external market forces, such as global political events, continue to exert pressure on the cryptocurrency space.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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