Bitcoin experiences a resurgence, potentially driven by a looming short squeeze, in response to the suspected decline linked to FTX on Monday


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The price of bitcoin experienced a rebound on Tuesday, reversing the losses observed the previous day, which had been driven by concerns related to FTX liquidations.

As per Coin Metrics, Bitcoin was up 4.5% at $26,185.72. On Monday, Bitcoin had dipped below the critical support level of $25,000 for the first time since March. This bounceback may be attributed in part to investors who had bet against the cryptocurrency rushing to cover their short positions, essentially triggering a short squeeze.

Investors had been selling their cryptocurrencies in anticipation of a hearing scheduled for Wednesday, during which liquidators could potentially be granted permission to commence the sale of assets belonging to FTX and its sister company, Alameda Research. Among the company’s most substantial holdings are tokens native to the Solana and Polygon networks, which had experienced a 3% and 5% drop, respectively, on Monday. However, by Tuesday, they had both recovered, rising by approximately 2.5%.

Nonetheless, there is still room for potential disappointment. Katie Stockton of Fairlead Strategies pointed out that weakened momentum in the intermediate term might pose challenges for Bitcoin’s ability to sustain a robust recovery. Following Tuesday’s rebound, the cryptocurrency’s next level to test on the upside stands at $27,600, corresponding to its 50-day moving average.

Aside from the FTX liquidation concerns, the cryptocurrency market has been grappling with a lack of substantial catalysts recently. Investors are awaiting clearer regulatory guidelines, and attention has once again shifted towards inflation and economic indicators. This shift in focus follows a series of data releases last week, which showed stronger-than-expected results, renewing concerns that the Federal Reserve might opt to raise interest rates once more before the year’s end.

This week, investors are eagerly awaiting the release of the August consumer price index on Wednesday and the producer price index on Thursday as they seek further insights into economic trends.


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