Bitcoin shows signs of local bottom as short liquidity clusters form

Cumulative short positions all the way up to $113,000 may spark a relief rally for BTC. The leading coins is showing signs of reaching a local bottom, with speculations of a further recovery. 

One of the chances for a BTC recovery may be a short squeeze, liquidating positions up to $113,000. Liquidity is rebuilding on the upside, which has historically led to rapid rallies. 

The presence of short liquidity does not guarantee a price rise, but may become a key factor for expanding the price of BTC, at least in the short term. 

BTC open interest recently recovered by $1B in the past day, rising to $33.52B. Over 71% of BTC positions are long on average. Hyperliquid is the exception, with over 43% of whales taking up short positions. 

The accumulated short liquidity has been high for a few days, but it does not guarantee a non-stop climb. In October, short liquidity went as high as $130,000, but there was no significant short squeeze. 

On the downside, BTC may sweep the long positions, especially the high-leverage cluster around $100,500.

BTC still trades with extreme fear

BTC still trades with extreme fear, as the index moved up to 23 points from a recent low of 21 points. 

The leading coin also trades with the highest volatility for the past six months, at 1.98%. The coin remains unpredictable, with expectations that the recent downturn may end. BTC has still not lost its ascending channel and has not shown signs of a bear market, but its price fluctuations still cause concerns. 

BTC dominance is at 58.4%, due to the underperformance of altcoins, rather than the inherent strength of Bitcoin. 

Is the BTC price forming a local bottom? 

BTC showed its ability to bounce, suggesting the $100K range served as the local bottom. 

Soon after forming a high-leverage short position cluster up to $105,000, BTC rallied again. Within a short timespan, the price recovered to $103,743.15, sparking a market-wide bounce from recent lows. 

The BTC recovery boosted ETH as well, as the token returned above $3,400. 

The move immediately caused $5.9M in short liquidations for BTC, and $9.6M in ETH short positions. While this is only a small fraction of available liquidity, the short squeeze was at least partially realized. On a four-hour basis, BTC saw $18.33M in short liquidations. 

On a 24-hour basis, long liquidations still dominated, with over $300M in BTC longs liquidated. 

There are other signs of a market bottom. Short-term holders have completed another round of capitulations. There are also signs of increasing whale spot orders, while ETFs returned to buying more BTC. 

The recent market downturn is seen as a shift in sentiment, and not a breakdown of the general bullish trend. 

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