Bitcoin’s Price Dips Below $70K: What Comes Next?

• Bitcoin’s price swings had been dramatic in 2024, hinting at a potential turning point.
• Short sellers had been forced to buy back Bitcoin at a loss, pushing the price even higher.
• Despite a dip under $70,000, analysts have seen signs that Bitcoin might aim for new highs.
  

Bitcoin’s price action in 2024 has been a rollercoaster, with the potential to make history or echo past volatile trends. A recent price surge, however, has triggered a significant event in the cryptocurrency market, the largest short squeeze since 2022. While the price has dipped slightly since, analysts see this as a potential sign of a renewed upward move.

Bitcoin Knocks Out Short Sellers

The recent price action resembled a dramatic boxing match between Bitcoin and short sellers who bet on a price decline. This strategy backfired spectacularly, resulting in massive losses for those expecting a dip. 

According to data from CryptoQuant , over $259 million worth of short positions were liquidated by the end of trading on May 20. This event, known as a short squeeze, occurs when a rapid price increase forces traders who had bet on a decrease to buy back their borrowed assets at a higher price to limit their losses. 

This squeeze marked the largest short contract liquidation since 2022. In simpler terms, short sellers borrow Bitcoin, expecting its price to fall. They then plan to buy it back at a lower price, return the borrowed coins, and pocket the difference. 

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However, when the price rises instead, they are forced to buy back the Bitcoin at a higher cost, incurring significant losses. This scramble to buy back short positions is what ultimately drove the price of Bitcoin up and increased its Open Interest volume.

Charting the Bitcoin Course

An analysis of Bitcoin’s Open Interest on Coinglass revealed a substantial influx of cash recently. Short liquidations trigger a domino effect, as closing these positions opens doors for new buyers to enter the market. This injects additional cash flow into Bitcoin, pushing up the Open Interest, which currently sits at $35 billion.

Even with Bitcoin’s price dipping below the $70,000 mark in the past 24 hours, the Open Interest has continued to climb. This suggests that beyond the short squeeze settlements, a significant number of traders are still betting on another price increase for Bitcoin.

According to the daily chart analysis of Bitcoin, the price dropped from the $71,000 range by the end of trading on May 21. This translates to a decline of roughly 1.8%, bringing the price down to around $70,142. As of this writing, Bitcoin is hovering around $69,780, reflecting a minor decrease.

While this dip might entice some short sellers to re-enter the market, many will likely remain cautious, observing the overall trend. Notably, Bitcoin has managed to rise above its short-term Moving Average, effectively turning it into a support level at around $66,000. If this support holds, Bitcoin could be poised for another test of the $75,000 resistance zone in the near future.

On the Flipside

• While the short squeeze caused a price surge, it doesn’t necessarily translate to sustained long-term growth for Bitcoin. Which is evident by the retracement back below $70,000.
• The continued rise in Open Interest suggests new buyers, but it doesn’t guarantee a sustained price increase.

Why This Matters

The massive short squeeze in Bitcoin not only triggered significant losses for bearish traders, but it also signals a potential shift in market sentiment. The rising Open Interest despite a price dip suggests a growing number of buyers are entering, potentially leading to a renewed bull run for Bitcoin. 

If you’re interested in learning more about the recent surge in Bitcoin and other cryptocurrencies, check out this article:
Bitcoin Leads Crypto Market Rally as Bulls Regain Control

Curious if the recent surge in Bitcoin’s price is the start of a new bull run? This article explores what analysts are saying:
Bitcoin Ready to Break $70,000? Experts Debate Current Bull Run