Hope for the possibility of another significant rally in the cryptocurrency market has returned, even though Bitcoin (BTC) rejected at $45,500. Currently, bulls are looking to shore up their defense at the $43,000 support level.
Data from Cointelegraph Markets Pro and TradingView shows that after making a run to a weekly high at $45,500 early on Tuesday, bears managed to drop the price of BTC to $42,900 during afternoon trading as investors realized profits and prepare to place bids around $38,000.
BTC/USDT 1-day chart. Source: TradingView
Here’s a look at what analysts are saying sparked the rally in BTC price over the past week and what levels to keep an eye on moving forward.
Legitimate breakout or a short squeeze?
The sudden move higher caught many traders off guard as headlines across the crypto space were predicting the onset of an extended bear market, but such dire warnings may have been premature based on data from a recent report from Glassnode. The blockchain analysis firm stated that “prices have bounced off a number of fundamental levels that have historically signaled undervaluation or a ‘fair value’ price.”
Through analyzing the data of liquidations on futures exchanges, Glassnode surmised that while the Long Liquidation Dominance charts “show that shorts have been on the back-foot this week, with a minor skew towards short side liquidations,” the lackluster magnitude of this metric indicates “that it is unlikely that price upside is being primarily driven by a short squeeze.”
Bitcoin futures open interest daily change. Source: Glassnode
Glassnode noted that during previous instances of major price declines, the futures open interest (OI) saw significant drawdowns or “de-leveraging events” as shown by the large downward red spikes on the graph above, a feature which is noticeably absent from this latest price decline.
“This may indicate the probability of a short squeeze is lower than first estimated, or that such an event remains possible should the market continue higher, reaching clusters of short seller stop-loss/liquidation levels.”
“We’re still in a…