A Coinbase analyst suggests that the current crypto market recovery could lead to a short squeeze, potentially driving prices higher.
Points
- The crypto market is experiencing a slight recovery.
- A Coinbase analyst suggests potential for a short squeeze.
- Increased buying activity on centralized exchanges could drive market rebound.
As the cryptocurrency market shows signs of recovery following a tumultuous period, a Coinbase analyst has highlighted the potential for a short squeeze, which could drive prices higher in the coming days. David Duong, a researcher at Coinbase, noted that increased buying activity on centralized exchanges could lead to a market rebound, despite ongoing jitters.
Over the past 24 hours, major cryptocurrencies like Bitcoin （BTC） and Ethereum （ETH） have gained over 6% and 7%, respectively. This recovery follows a sharp decline earlier in the week, during which over $1 billion in leveraged positions were liquidated. The global cryptocurrency market cap has increased by 5.4%, reaching $2.04 trillion, according to CoinGecko data.
Duong emphasized that the current market conditions, including in-kind Bitcoin and Ethereum distributions by Genesis as part of its bankruptcy liquidation plan and the unwinding of yen-based carry trades, are weighing on the market. However, the potential for a short squeeze remains, as the demand for short positions continues to be high, with Bitcoin futures funding rates remaining negative.
A short squeeze occurs when a heavily shorted asset experiences a rapid price increase, forcing short sellers to cover their positions by buying the asset, which further drives up the price. The recent market volatility has created an environment where such a squeeze could occur, potentially leading to a significant price rally.
Despite the negative sentiment and cautious market conditions, the slight price recovery suggests that the worst may be over for now. The easing of volatility in risk assets and stronger U.S. ISM services data have contributed to a more optimistic outlook.
Investors are advised to keep an eye on market indicators and trading volumes to assess the likelihood of a short squeeze and potential further recovery. The current pullback in the cryptocurrency market does not signal the start of a new long-term trend but rather reflects a defensive approach and a more constructive outlook for the fourth quarter of 2024.
解説
- Short Squeeze Potential: Highlights the possibility of a rapid price increase due to covering of short positions.
- Market Recovery: Current recovery in major cryptocurrencies suggests easing of market volatility.
- Negative Sentiment: Ongoing negative sentiment and high demand for short positions indicate cautious market conditions.
- Investment Strategy: Investors should monitor market indicators to gauge the likelihood of a short squeeze and potential further recovery.