Short Squeeze Behind Late May Rally?
Bitcoin is Bitcoin and will do as it pleases but some may say the recent rally was a surprise and possibly due to a short squeeze.
Was It A Short Squeeze?
The global open interest had seen a surge towards the end of last week and this has been even more prominent in the bitcoin open interest. The surge had sent it towards a new all-time high of 307,189 BTC right before the price of the digital asset had made its incredible recovery. This would only last for long, however, given that the BTC denominated open interest would crash by a whopping 18,000 BTC in the next two hours but the impact had already been recorded.
The price of bitcoin had climbed above $31,000 after the open interest had recorded this new all-time high, suggesting that this was a short squeeze. The BTC denominated open interest was at 288,875 BTC hours later while BTC had continued on its upward trend. The two-hour period where the open interest had seen this sharp decline was especially visible on the ByBit exchange, which had recorded a 12% decline in this time period.
Following this, leverage remains extremely high, and open interest has since recovered from its decline. Its recovery was not enough to push it back to its new all-time high but it had landed at a higher low which was higher than the previous all-time high of 289,780 BTC that was recorded two weeks ago.