Bitcoin Short Positions Worth $32 Million Wiped Out as Price Briefly Spikes to Mid-$27,000s – Here’s Where BTC is Headed Next
Bitcoin (BTC) futures positions worth over $44 million were wiped out on Monday in choppy trade that saw the spot price of the world’s largest cryptocurrency by market capitalization swing more than $1000 (over 4%) between session lows around $26,400 and new highs for the month around $27,400.
BTC was last trading in the $26,700s, up close to 1% on the day.
No specific news stories or fundamental catalysts could be precisely pinpointed as driving the price action.
A filing from an auditor of Binance.US, who said they found it “very difficult” to verify Binance’s collateralization of assets at times, could have led to some jitters that weighed on sentiment, leading to the pullback in the BTC price back below $27,000.
But underpinning the price action was 1) expectations for an interest rate hold from the US Federal Reserve later this week and 2) technical buying, with Bitcoin recently finding support at its 21DMA and at a downtrend that had been in play since early August.
As per coinglass.com, of the $44 million in futures position liquidations on Monday, around $32 million were of short positions, not too surprising after BTC hit its highest level so far this month.
That marked the biggest wipeout of Bitcoin bears since last Monday, when the BTC price fell briefly to its lowest level in three months under $25,000.
Bitcoin’s price outlook took a turn for the worse back in August when the cryptocurrency fell below its 2023 uptrend and 200DMA.
However, since breaking above its recent downtrend and 21DMA, things are looking brighter.
At the very least, BTC appears to have found a new $25,000-$28,000ish range.
For a retest of yearly highs to be on the cards once again, a break above key resistance in the $27,700-$28,500 area will be needed.
Where Next for the Bitcoin (BTC) Price?
Macro is likely to be a key driver of the Bitcoin price this week.
The Fed is widely expected to hold interest rates on Wednesday, but it also likely to keep the door open for another rate hike later this year.
The central bank will be releasing its new economic forecasts and a new dot plot summary of Fed members interest rate projections – these two releases will be closely scrutinized by traders, and will be used to assess the probability of further rate hikes in 2023, and on the timing of any potential rate cuts in 2024.
While most investors don’t expect another rate hike this year, the Fed’s communication that another rate hike is possible is preventing markets from getting overly excited regarding the pricing of rate cuts in 2024 and beyond and this is helping to keep US yields and the US dollar underpinned.
So, while this week’s Fed meeting might not provide a negative shock, it also probably won’t provide much of a boost to Bitcoin either, assuming the US dollar and US yields don’t reverse aggressively lower.
Bitcoin has a historically negative correlation to the US dollar and US yields.
The world’s largest cryptocurrency may well remain locked within its recent multi-month $25,000-$28,000 ranges.