This Industry Expert Believes Bitcoin (BTC) is Set for a Short A Squeeze

June 17, 2021 1:14 PM EDT

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The combined crypto market has lost roughly $1 trillion over recent weeks as a result of a sharp sell-off. Bitcoin (BTC) price has plummeted from $65,000 to $40,000 during that period.

Moreover, analysts are predicting that BItcoin could face the so-called “short squeeze”, referring to the instance when a price of an asset surges quickly as a result of a high number of bets against the asset going wrong, forcing those traders to buy back the asset to cover those bets.

"Given bitcoin's past market performance, when traders use excessive leverage to short the market during a horizontal price adjustment, there will often be a short squeeze phenomenon," Flex Yang, CEO of crypto lender Babel Finance.

Yang noted that recent capital inflows come “from short-sellers and that leverage has greatly increased."

Data also shows that the volume of BTC perpetual holdings on Binance has soared by 110% since the crypto market crash in April, while the ratio of long to short traders plunged to a new low of 0.89.

Yang said that some of the reasons that contributed to this excess of shorts are high expectations of a bear market and because Bitcoin holders are building hedges.

Historically, a surge in short-selling is typically followed by a sharp increase in Bitcoin price. Bitcoin had a strong bull run at the start of the year but that trend stopped in April when investors were spooked by Beijing's crackdown on cryptocurrencies and increasing concerns over Bitcoin’s rising energy demands.

Furthermore, Elon Musk recently announced Tesla’s decision to suspend Bitcoin payments until the cryptocurrency starts using more renewable energy.

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