Bitcoin’s recent drop to 53-day lows may be due to a “cascading long squeeze” as miners continue to sell, according to a Bitcoin analyst.
In a post on June 24, pseudonymous Bitcoin analyst Willy Woo explained that speculators adding to new long positions may have fueled more liquidations, resulting in a cascading effect. A long squeeze occurs when a large number of long-position investors start selling their holdings as the price falls, causing further price drops and affecting other long-position holders.
The opposite of a long squeeze is a short squeeze, a term that gained attention when retail traders drove up the price of GameStop stocks in January 2021. This forced large short investors to buy back the stock at a higher price to limit their losses, pushing the stock price up significantly.
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, indicating that traders currently have more confidence in the price going downward.
Woo also highlighted the ongoing “post-halving miners capitulation” event, which suggests that miners will turn off their hardware and sell their coins if Bitcoin falls below a certain price and mining becomes unprofitable.
On June 25, Bitcoin’s price was trading slightly above the crucial $60,000 level, at $61,320 at the time of publication, according to CoinMarketCap data. Bitcoin saw its biggest daily decline in over three months on June 24, dropping 6.26% to $58,890, according to pseudonymous crypto commentator Bitcoin Archive.
JAN3 CEO Samson Mow believes that the “Bitcoin dip is purely sentiment and fear driven, not from selling off large holdings.” This article does not contain investment advice or recommendations.