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Bitcoin has experienced a low-volatility trading session as the cryptocurrency moves within a tight range. The cryptocurrency flirts with a critical support zone of around $19,500, which has held up despite last week’s spike in selling pressure.
At the time of writing, Bitcoin (BTC) price is trading at $19,700 with sideways movement for the past 24 hours and the past week. As Bitcoin’s price stagnates, crypto investors seem to be shifting their attention to other cryptocurrencies or waiting to see if these levels hold up.
Some traders are daring more and expect Bitcoin to retest critical support at its multi-year low of around $18,000. As a result, the BTC/USDT trading pair saw an increase in the amount of Open Interest (OI).
As a pseudonymous trader noted, the rise in Open Interest for the past week totaled nearly half a billion dollars or 24,000 BTC. These short positions piled up “aggressively” as the price of BTC sits on a massive wall of bid orders.
There are over $50 million in buy orders that are directly below BTC’s current price levels. The price of the number one cryptocurrency has also bounced back from $19,500 during the downward price action over the past month.
Therefore, the odds appear to be stacked against these $500 million in short positions, and as Bitcoin consolidates, with liquidity rising, the likelihood of a short squeeze increases. A short squeeze is often caused by current BTC conditions: many shorts pile up at support levels leading to a cascade of liquidations as price trends move higher.
This is rocket fuel for any potential upside as liquidations bolster bullish momentum and push Bitcoin higher. The pseudonymous trader said:
This could work for the shorts, but if the spot starts to increase the price, they will eventually have to cover their positions. Of course, if spot supports the movement downwards, they will be comfortable and not have to close their positions. They are vulnerable.
What can get in the way of a Bitcoin Short Squeeze?
Crypto has seen low volatility due to the extended vacation in the United States. Tomorrow, as traditional markets reopen, the price of the first cryptocurrency may see more action.
A green open for major stock indices, such as the S&P 500 and the Nasdaq 100, could push the price of BTC up. The opposite could lead to a retest of downward liquidity.
In addition, as measured by the DXY index, the US dollar recently broke out of a multi-decade resistance, and its recovery levels were last tested in 2003. The currency could retest lower levels to confirm this breakout becomes invalid. . So giving some room for the crypto market to rally.