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Coinbase Analyst Eyes Short Squeeze Opportunity Amid Crypto Recovery
The cryptocurrency market is experiencing signs of recovery after a volatile Monday, which saw over $1 billion in leveraged positions liquidated, causing major tokens to plummet by up to 20%.
On Tuesday, Coinbase’s researcher David Duong pointed to a potential short squeeze, triggered by increased buying on centralized exchanges. “While market volatility is expected to continue in the short term, there’s a chance that shorts could get squeezed, potentially catalyzing a rebound in the coming days,” stated Duong.
Over the past 24 hours, the balance between liquidated long and short positions is nearly even. According to Coinglass, total liquidations amounted to $425 million, with longs and shorts each contributing around $212 million.
Significant cryptocurrencies such as Bitcoin and Ethereum have seen increases of over 6% and 7%, respectively, over the last 24 hours, as reported by The Block’s Prices Page. The global cryptocurrency market cap has also risen by 5.4% to $2.04 trillion, as per Coingecko.
Despite these gains, specific factors continue to pressure the market. “The cryptocurrency landscape is currently navigating through the distribution of Bitcoin and Ethereum by Genesis as part of its bankruptcy liquidation plan, and the unwinding of Yen-based carry trades affecting decisions by Mt. Gox creditors,” added Duong.
Amidst the modest recovery, the Bitcoin futures funding rate has remained negative, indicating that the demand for short positions is still prevalent, suggesting ongoing bets against a rise in Bitcoin’s price.
Monday’s market turbulence followed a broad asset sell-off in equities, with key stock indices like London’s FTSE 100 falling amidst global recession fears and escalating Middle Eastern tensions. Although risk asset volatility spiked, with the VIX jumping from 20 to 65 in a single day—a level seen during the pandemic and global financial crises—it has since receded to 33.84.
Duong clarified that Monday’s downturn in the crypto market is not indicative of a new long-term trend or cycle. “This pullback aligns with our conservative stance for Q3 2024 and a more positive outlook for Q4 2024, despite the recent market stress testing our confidence,” he concluded.
Disclaimer: The projections and information presented here are for educational purposes only and should not be considered financial advice. CoinGrab.Asia assumes no responsibility for any losses resulting from the use of this data. Readers are encouraged to perform their own research and proceed cautiously before engaging in any related activities.
