Bitcoin: Caution warranted as BTC short squeeze risk rises

ambcrypto.com:

Bitcoin and the altcoin market are going through the most bearish week of 2023 so far. A situation that has resulted in the liquidation of long positions as prices crashed. Many derivatives traders have consequently shifted to short positions but there is an unforeseen risk.

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Bitcoin’s bearish performance so far this week has enticed many traders to execute short positions to take advantage of the falling prices.

But herein lies a potential risk of liquidations in case whales start buying up BTC, triggering a bullish pivot. Whales often take advantage of such situations because the liquidations extend the directional move, allowing them to benefit.

Bullish: – Jobs added < 224k – Unemployment rate > 3.4%

Seems like the market is setup for a squeeze after yesterday's action, traders are heavily short the crypto market. But, we'll need a downside miss IMO! pic.twitter.com/qrxADT6IdG

— tedtalksmacro (@tedtalksmacro) March 10, 2023

A surge in Bitcoin Funding rates suggests that there is currently a strong increase in shorts. This means there is an increased risk of shorts liquidations if whales suddenly start buying.

Such a scenario is more likely to take place when there is a high level of leverage in the market. The level of leverage is still low so far, hence the risk of liquidation may not be as pronounced.

Source: CryptoQuant

The BTC exchange reserve metric indicates a pivot after the latest sell pressure. Exchange reserves are on the rise, courtesy of the recent sell pressure.

On the other hand, the strong pullback observed this week has also offered a lower entry point