In short
- About $3 billion of shorts risk liquidation if Bitcoin rises 3% to $96,250, while $3.52 billion of longs would be wiped out with a 4.54% decline to $89,209, per CoinGlass.
- Derivatives data shows falling open interest and rising perpetual CVD, indicating short covering rather than renewed bullish conviction.
- The order book has turned negative since December 2, underscoring weak demand as traders look to the Fed’s policy signal for direction.
With the Federal Reserve’s interest rate decision less than a week away, speculation is rife among Bitcoin investors, with more than $6 billion in positions at risk of liquidation.
According to CoinGlass data, almost $3 billion in short positions will be liquidated if Bitcoin moves just 3% to $96,250. On the other hand, $3.52 billion in long positions will be blown out of the water if Bitcoin falls 4.54% to $89,209.
“Cryptocurrencies are facing strong resistance to upside moves, with market participants still maintaining a bearish mindset, leaving the market highly vulnerable,” Adam Chu, principal researcher at options analytics firm GreeksLive, told me. Declutter yesterday.
Bitcoin is currently trading at $93,800, up 1% in 24 hours and nearly 4% in the past week, after a rocky start to the month, CoinGecko data shows.
With bond traders pricing in a nearly 90% quarter-point cut in interest rates, a potential price increase could trigger a short squeeze, pushing Bitcoin close to the key psychological level of $100,000.
A short squeeze occurs when the price moves against investors’ bearish bets, forcing them to hedge their positions by buying, accelerating the uptrend of the underlying asset.
Current market conditions create a high-stakes tug-of-war ahead of the Fed’s decision, where the market’s underlying fragility could amplify the impact of the central bank’s policy signal.
However, a closer look at the derivatives data reveals a more nuanced picture.
Open interest for Bitcoin derivatives contracts has steadily declined since Nov. 21, even as the cumulative volume delta for perpetual contracts has risen — a pattern that suggests traders are short-covering, according to Velo facts.
In other words, the data suggests that Bitcoin is not rising because traders are not turning bullish. Instead, prices could rise as short sellers close their positions while spot buying remains weak.
Yet funding rates and Coinbase premium indicators, which help determine investor positioning and spot purchasing demand, remain indecisive and show no particular directionality.
Rejuvenating the uptrend will likely require a sustained increase in spot cumulative volume delta and open interest.
Spot and perpetual order books of up to 10% have now turned negative since December 2, as traders are unwilling to push prices up further.
“At this stage, a short squeeze seems more likely than a long squeeze,” said Ryan Lee, chief analyst at Bitget Declutter. “Institutional inflows remain stable, regulator signals are constructive and sentiment is gradually shifting risks.”
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