Bitcoin Aims for $58K Amid Vulnerable Crypto Markets and Short Squeeze Risks, Analyst Predicts
Bitcoin (BTC) saw an uptick on Tuesday as the cryptocurrency market continued to recover from the recent sharp decline that caused anxiety among investors. The leading cryptocurrency was approaching $58,000 during the late U.S. trading session, marking a 1.7% increase in the past 24 hours and nearly 10% higher than last Friday’s low. Ether (ETH) and Solana (SOL) also experienced gains, each rising by 1.5% over the previous day.
Altcoins like Toncoin (TON), Artificial Superintelligence Alliance (FET), and Internet Computer (ICP) emerged as the top performers, with gains ranging from 5% to 8%. The CoinDesk 20 Index, a benchmark for the broader crypto market, climbed 1.3% to 1,835, with 16 of its 20 components advancing throughout the day.
The upcoming U.S. presidential debate between Donald Trump and Kamala Harris may not mention cryptocurrencies, but the differing stances of the two parties on digital assets and their potential impact on prices add significance to the event. Uncertainty surrounding the election is expected to exert downward pressure on crypto prices until November, according to Aurelie Barthere, a principal research analyst at Nansen. Barthere noted that the debate could provide a temporary respite, especially as Harris’ lead in the polls may diminish following the Democratic National Convention.
Despite lingering concerns among investors about further market declines, a recent market report by K33 Research suggests a forthcoming significant rally in the crypto space. The report highlighted that the 30-day average funding rates for perpetual swaps have turned negative, a rare occurrence since 2018, with only six instances recorded. Historically, when monthly funding rates dip into negative territory, it has signaled a market bottom. Analysts Vetle Lunde and David Zimmerman from K33 Research emphasized that previous occurrences of this metric flipping negative have led to average returns of 79% in the subsequent 90-day period, with a median return of 55%.
The report also pointed out that open interest in derivatives has been steadily increasing to levels not seen since late July, accompanied by a rise in short positions and persistent negative funding rates. This setup potentially sets the stage for short squeezes in the market. The authors of the report suggested that similar funding rate environments present a compelling case for a bullish stance on Bitcoin in the coming months.
In conclusion, the cryptocurrency market continues to show resilience and potential for growth, with various factors influencing price movements and investor sentiment. As the market navigates through uncertainties, strategic analysis and monitoring of key metrics could provide valuable insights for market participants.
