Bitcoin extended yesterday’s sharp rally, climbing above the $70,000 psychological resistance as short sellers rushed to close losing positions. With $1.4 billion worth of short positions at risk of liquidation, forced buying added further fuel to BTC’s upside. However, despite the breakout, the broader market remains cautious, viewing the move as a local rally rather than a confirmed trend reversal.
Bitcoin crosses $72K as $1.4 billion shorts buy back
Bitcoin short sellers came under extreme pressure as $1.4 billion worth of short positions were vulnerable to liquidation as the market turned against them. With Bitcoin crossing above the $70K level, the short sellers were forced to buy back their positions to avoid exposing their positions to more losses. And this added more buying pressure to the already rallying BTC prices, which eventually crossed above the $72K resistance level.
When a short seller buys back BTC, they are closing their short position and ending their bet that the price will fall. This helps them stop accumulating further losses if Bitcoin continues to rise.
For example, if they shorted BTC at $65K and it rises to $70K, buying it back locks in the loss. If BTC then climbs to $75K, they avoid taking an even larger loss because their position is already closed. Therefore, buying back BTC helps short sellers limit their exposure to further upside and potential losses.
Bitcoin reclaims 200-day MA in local rally
As Bitcoin crossed above the 200-day MA following the short sellers’ evasive action, it gave the bullish outlook. The 200-day moving average is an indicator that represents the average price of Bitcoin for the past 200 days. Hence, crossing above this level is considered a bullish sign as BTC is above par.
However, according to Glassnode, this is just a rally and not a trend change. Although the perpetual demand has turned positive and the ETF inflows have stabilized, the trend has not turned bullish.
The trend has not reversed and will not reverse until the yields ease and the profit/loss ratio recovers toward 2, and as such, any Bitcoin rebound should be viewed as a local rally rather than a broader trend reversal, stated Glassnode
