Bitcoin’s recent drop to 53-day lows may be attributed to a “cascading long squeeze” caused by miners selling their holdings, according to a Bitcoin analyst. In a recent post, the analyst explained that speculators adding to new long positions fueled the liquidations, leading to a cascading effect on other long-position holders. This phenomenon occurs when investors with long positions start selling as the price falls, in order to limit their losses. This selling pressure further drives down the price, causing more long-position holders to sell. The opposite scenario, known as a short squeeze, occurs when short investors are forced to buy back stocks at a higher price to limit their losses, causing the price to rise.
Data from CoinGlass shows that a dip below $60,000, such as the one on June 24 when Bitcoin fell below $59,000, would result in $1.16 billion in long positions being wiped out. In contrast, a similar upward swing of 3.73% would erase $2.18 billion in short positions, indicating that traders currently have more confidence in the price going downward. The analyst emphasized the need for a breakdown of what is happening in the market due to the prevailing fear.
The recent drop in Bitcoin’s price coincided with a significant decline in the Crypto Fear and Greed Index, which measures market sentiment for Bitcoin and the wider cryptocurrency industry. This drop in sentiment is the lowest score recorded in nearly 18 months.
The analyst also highlighted the ongoing “post-halving miners capitulation” event, which suggests that miners will shut down their hardware and sell their coins if Bitcoin’s price falls below a certain threshold, making mining unprofitable. This adds to the selling pressure in the market, as miners sell their Bitcoin to fund necessary upgrades and weaker miners are forced to close shop and liquidate.
Bitcoin’s price is currently trading slightly above the $60,000 level, at $61,320, according to CoinMarketCap data. On June 24, Bitcoin experienced its largest daily decline in over three months, dropping 6.26% to $58,890. CEO Samson Mow believes that this dip in Bitcoin’s price is driven by sentiment and fear, rather than large-scale selling.
Please note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any investment decisions.