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Bitcoin eyes $31K amidst short squeeze, will it push past key resistance?

Bitcoin is close to its yearly high, but some investors have warned traders to be “cautious” until the resistance level is broken.

The phenomenon of ‘Pumptober’ is continuing well into the end of the month: earlier today, Bitcoin (BTC), the largest cryptocurrency, touched $30,925, marking the strongest price action since July.

The legacy crypto is now up 14% over the past 30 days and 3% in the past 24 hours, CoinGecko data shows.

Some traders believe that Bitcoin is now back at key resistance levels for the third time since April.

Crypto investor and writer Jelle wrote on X that the resistance level will “eventually give in – and the move will be explosive”.

Jelle added in a later tweet that until these levels are broken however, it’s best to be cautious. “Not many people are ready for whats going to happen in the next months,” they stated.

Short liquidations may have accelerated the price of BTC

CoinGlass data shows there have been $114.43M liquidations in the past 24 hours. A majority of these liquidations were short positions ($84.93M) – $22.33M of which were Bitcoin.

Short selling is a trading strategy whereby investors borrow and sell an asset (like Bitcoin) expecting the price to drop. The aim is to buy the asset back later at a lower price, pocketing the difference.

However, if the price rises rather than falls, short sellers are forced to buy the asset back in order to cover their positions.

This is partly what we are seeing here: a short squeeze is driving demand and pushing the price higher.

Liquidation heat map: CoinGlass

Another trader, Skew, wrote on X that if the resistance area pulls back, we can expect “continuation signals around $29.5K – $28.7K area”.

The positive price action will come as a surprise to many investors who expected intense market volatility amidst a period of growing geopolitical uncertainty.

Bullish indicators in the wider market: Morgan Stanley

Last week, a Morgan Stanley analyst wrote a blog post expressing optimism that the crypto winter is finally coming to an end.

“Based on current data,” wrote strategist Denny Galindo, “signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon.”

Read more: 3 key signs the crypto winter might be ending: Morgan Stanley

One of the key factors in the bullish forecast is the upcoming Bitcoin halving, which is expected to take place in April 2024.

“One unique aspect of bitcoin is that it is designed to go through a process called “halving” that creates scarcity, so that bitcoins can maintain their value,” Galindo wrote. “By intentionally limiting the supply of new bitcoin, the shortage caused by the halving can affect the price of bitcoin to potentially spur a bull run. There have been three such runs on bitcoin since its inception in 2011, each lasting 12 to 18 months after the halving.”

However, other analysts predict that the price of Bitcoin could slide by 50% in the run up to the halving, surging in the months after.

Read more: Bitcoin may sink 50% before next halving: Analyst

Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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