Global stock markets continue to rebound, while cryptocurrencies are on a downward spiral. The largest cryptocurrency, Bitcoin, has fallen more than 12% over the past month and has now broken through the $60,000 mark.

However, K33 Research, a cryptocurrency analysis firm, has indicated that the risk of a "short squeeze" in the Bitcoin derivatives market is on the rise, which could lead to a strong rebound for Bitcoin.

One of the key indicators is the funding rate of Bitcoin perpetual futures, an important tool for measuring market speculative sentiment. K33 Research noted that in the week ending August 20th, the seven-day average annualized value of this rate fell to its lowest level since March 2023, reflecting a strong bearish sentiment in the market.

At the same time, K33 stated that in the past week, the nominal open interest in the perpetual contract market increased by nearly 29,000 Bitcoins. Additionally, data from HODL15Capital on August 19th showed that the short trading volume of Bitcoin on major cryptocurrency exchanges doubled in a single day, reaching $18.3 billion, with leveraged short positions in Ethereum also surging significantly.

Analysts Vetle Lunde and David Zimmerman from K33 said in a report: "The recent average funding rate for perpetual swaps has been negative, and the open interest has increased significantly, indicating that market short-selling behavior is very aggressive. This structural change could trigger a short squeeze."

Advertisement

A short squeeze typically occurs when prices rise unexpectedly, forcing bearish traders to close their positions, which in turn further drives up the price.

Despite global stock markets shaking off concerns about US economic growth and rebounding to historical highs, with gold also reaching an all-time high, Bitcoin and the broader cryptocurrency market still experienced significant declines in August. So far, Bitcoin has fallen more than 12% this month, significantly lagging behind the nearly 1% increase in the MSCI Global Stock Index.

Currently, Bitcoin has broken through the $60,000 mark, with the latest price reported at $59,695.40.

Furthermore, some analyses suggest that the US government could be another major challenge facing the cryptocurrency market. Data from Arkham Intelligence shows that the US government recently transferred $600 million worth of seized Bitcoins to exchange wallets operated by Coinbase Global. Khushboo Khullar, a venture partner at Lightning Ventures, stated that the US government might sell these Bitcoins, leading to a temporary drop in prices.