On November 14, US CPI data showed an inflation index that was below market expectations. The stock market reacted positively while the cryptocurrency market moved in a different direction before returning to current levels.
Meanwhile, some cryptocurrencies have seen an increase in short positions, which could lead to short squeezes if sentiment remains positive. With that thought in mind, Finbold turned CoinGlass and collected long/short ratio data on November 15th.
Interestingly, this high volatility event contributed to increased derivatives volume for Bitcoin (BTC). The leading cryptocurrency recorded $45 billion worth of derivatives trading, up 59% in the last 24 hours.
Is there a risk of a short squeeze for Bitcoin (BTC)?
Among the market’s open interest in speculation on Bitcoin, short positions worth $20.42 billion dominate with a share of 51.87% against the long positions of $18.94 billion. While these numbers suggest that there is a prevailing bearish sentiment in this segment, it also poses the risk of a possible short squeeze to liquidate the bears.
Bitcoin derivative volume and long/short ratio in 24 hours. Source: CoinGlass
In particular, shorter time frame ratios show that the derivatives market is either neutral or bullish towards Bitcoin. This reflects the aforementioned volatility, where traders turned pessimistic when faced with a massive sell-off event 24 hours ago – to a sentiment shift with the recovery.
In the event of a short squeeze, Bitcoin could revisit its monthly highs of over $37,500 per coin. Such price action would reward cryptocurrency traders with a gain of almost 4% from the current price of $36,132 at the time of publication.
Bitcoin 1-month price chart. Source: Finbold
Ethereum (ETH) could be facing a short squeeze
A similar pattern can be observed with Ethereum (ETH), the second largest cryptocurrency by market capitalization and the leading Web3 blockchain. Essentially, Ethereum’s 24-hour short positions of $11.59 billion dominate the long positions of $10.64 billion by 52.15%.
However, the 12-hour long/short ratio is almost the same: long positions worth $3.37 billion versus short positions worth $3.33 billion.
Ethereum long/short ratio in 12 and 24 hours. Source: CoinGlass
Amid a short squeeze, ETH could return to its monthly high of $2,128. Ethereum’s native token is trading at $2,009 as of press time, which would represent a gain of almost 6% for Ether investors.
ETH 1-month price chart. Source: Finbold
However, there is no guarantee that a massive liquidation event like a short squeeze will occur. Despite the notable divergence between the long/short ratio time frames, overall market sentiment, project developments, and market maker actions will have the final say in determining the price direction for both digital assets.
Disclaimer: The content of this website should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.
Source : finbold.com