Bitcoin Short Squeeze Lifts Prices Back to $26K

 A short squeeze refers to a price rally driven by an unwinding of bearish bets.

Bitcoin (BTC) jumped to nearly $26,000 during the asian trading hours on Tuesday, reversing Monday's decline to three-month lows under $25,000.

The move could be best described as a short squeeze – a rally powered by an unwinding of bearish derivative bets.

Open interest declined as shorts exited their bearish positions due to a shift in funding rates. Funding rates reflect costs tied to holding bullish or bearish bets in perpetual swaps (expiry-free futures). Negative rates signal bearish leverage, while positive rates indicate the opposite. @52kskew called it a classic short squeeze on X. Bitcoin and altcoins dipped on Monday due to concerns about potential selling pressure from the troubled crypto exchange FTX.

Though impressive, the price recovery from crucial support at $25,000 may remain capped due to a lack of immediate bullish catalysts. The bitcoin spot ETF optimism has faded, with observers shifting focus to the impending liquidation of FTX's altcoin holdings.

Per some observers, the bias remains bearish while prices are held below the 50-day simple moving average.

STORY CONTINUES BELOW

"Bitcoin price is $25,836 below the 50-day moving average of $27,731 - which is bearish - and the week over price price decreased by 0.5%. Ethereum (ETH) price is $1,617 below the 50-day moving average $1,752 - which is bearish - and the week over price decreased by 1.1%. Overall, the trend is down, which indicates a bearish sentiment," crypto services provider Matrixport's Markus Thielen said.

Edited by Parikshit Mishra.