A “cascading long squeeze” of Bitcoin (BTC) could explain the asset’s recent drop to 53-day lows as miners continue to sell, according to a Bitcoin analyst.
“Speculators kept adding to new long positions, just adding more fuel for more liquidations in a cascading long squeeze,” pseudonymous Bitcoin analyst Willy Woo wrote in a June 24 X post.
A long squeeze happens when a large number of long-position investors (those betting on a rise in Bitcoin’s price) start selling their holdings as the price falls to cut their losses. This causes the price to drop even more, leading to a cascading effect on other long-position holders.
The opposite is referred to as a short squeeze, a term which became well-known when retail traders pumped up the price of GameStop stocks in January 2021, forcing large short investors to buy back the stock at a higher price to limit their losses and thus pushing the stock price up to meteoric heights.
According to CoinGlass data, a dip below $60,000, like the one on June 24 when Bitcoin fell below $59,000, would wipe $1.16 billion in long positions. However, a similar 3.73% upward swing would erase $2.18 billion in short positions, showing there’s currently more confidence from traders in the price going downward.
“Worth a breakdown of what’s happening given the fear in the market,” Woo added.
It comes as the Crypto Fear and Greed Index — which measures market sentiment for Bitcoin and the broader cryptocurrency industry — tanked to its lowest score in nearly 18 months.
Post-halving miners capitulation continues
Woo also pointed out the ongoing “post-halving miners capitulation” event, which is a theory that miners will turn off their hardware and sell their coins if Bitcoin falls below a certain price and mining becomes unprofitable.
“Superimposed on this liquidation squeeze, we have a post-halving miners capitulation,” said Woo, explaining that miners selling Bitcoin could pay for needed upgrades while the weakest miners are closing shop and being liquidated."
Related: Bitcoin analysts forecast BTC price drop to $50K before parabolic run begins
On June 25, Bitcoin’s price is trading slightly above the crucial $60,000 level, at $61,320 at the time of publication, according to CoinMarketCap data.
On June 24, Bitcoin saw its biggest daily decline in over three months, dropping 6.26% to $58,890, according to pseudonymous crypto commentator Bitcoin Archive.
“The biggest daily discount in price for 97 days,” they wrote on June 24.
JAN3 CEO Samson Mow believes the “Bitcoin dip is purely sentiment and fear driven, not from selling off large holdings.”
Magazine: Ethereum’s recent pullback could be a gift: Dynamo DeFi, X Hall of Flame
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
