Bitcoin [BTC], the most dominant cryptocurrency in terms of market capitalization, has recently gone through a modest recovery in its price trends. Currently, BTC is trading at $57,110 following a 4.27% increase within the last 24 hours.
With the price rebound, trading volume surged by 53.38% to reach $33.57 billion. Furthermore, BTC’s market capitalization has risen by 4.24% to $1.13 trillion.
Prior to this upturn, BTC was on a significant downward trend, declining by 6.54% over the past month. Despite the recent gains, the price is still substantially lower than its recent peak of $65,103, standing at a 22.8% decrease from its all-time high.
The current market situation has sparked some optimism among analysts, indicating signs of life for BTC. One analysis by Santiment pointed towards potential further price increases, highlighting Bitcoin’s market value.
Analysis of Market Sentiment
Santiment observed that the value of BTC has risen over the last 24 hours, even though it has been subjected to shorting on major exchanges like Binance and Bitmex over the last four days.
Shorting, a strategy where traders borrow BTC to sell it with the expectation of buying back at lower prices, has become a prevailing sentiment among many traders, anticipating a price drop.
Therefore, the recent heavy shorting activity implies a negative sentiment towards BTC prices, often driven by fear, uncertainty, and doubt (FUD). This lack of confidence leads investors to anticipate a downward correction.
Nevertheless, if prices do not decline as expected by short sellers and instead go up, they face pressure to cover their positions by repurchasing the borrowed assets to limit potential losses, as evidenced by the recent gains within the last 24 hours.
Consequently, the upward price movement has triggered an increase in the liquidation of short positions, indicating heightened market volatility. This rush to buy back assets due to short sellers’ liquidation exerts upward pressure on prices, resulting in a short squeeze.
Bitcoin’s Price Analysis
According to Santiment’s findings, Bitcoin’s market is witnessing increased uncertainty, leading to higher volatility levels. September is historically marked by volatility spikes, with this year reflecting a 70% increase in BTC’s 30-day volatility.
As a result, indicators such as Implied Volatility have surged since the beginning of September following a decline in August. Particularly, short-term options have experienced a 60% surge from 52%.
Furthermore, the upcoming U.S. presidential elections are contributing to the current market uncertainties. This FUD sentiment is further bolstered by a sudden rise in Long Term Holder SOPR from 1.4 to 2.0.
Even though prices are climbing, a potential pullback may be expected to realize gains from selling.
Hence, the demand for short positions indicates a prevailing expectation of price decline among investors. Yet, such demand for short positions could inadvertently drive further demand, resulting in continued price surges.
If FUD continues to push prices higher, Bitcoin might challenge the $59,363 resistance level and eventually surpass the $60k milestone.