...
“Dips in #Bitcoin keep on getting shorter and shorter. Meanwhile, rallies are lasting longer and moving quicker,” said analysts for The Kobeissi Letter. “This is a textbook sign that shorts are being squeezed as we hit fresh all-time high territory.”
Because of this, the analysts warned that Bitcoin may be setting up for a short squeeze.
“Currently, the gap between institutional longs and hedge fund shorts is at a record high,” they said. “While hedge funds hold nearly 15,000 in net short contracts, institutions hold nearly 20,000 in net longs.”
...
Based on analysis from crypto market intelligence firm CryptoQuant, the pressure on shorts is likely to continue moving forward as the Bitcoin market continues to move closer to a liquidity crisis.
“Bitcoin demand has soared to unprecedented levels this year. We estimate monthly Bitcoin demand has increased from 40K Bitcoin at the start of 2024 to 213K Bitcoin as of the time of publishing,” the firm said in its latest Weekly Crypto Report. “An important factor behind this demand growth is ETF buying, but as of late other large investors have also increased their Bitcoin allocation.”
“On the supply side of the equation, the total Bitcoin readily available for selling continues to decline,” they noted. “The total ‘visible’ amount of Bitcoin at key entities stands at 2.7 million Bitcoin, down from an all-time high of 3.5 million Bitcoin in March 2020.”
“Record Bitcoin demand paired with declining sell-side liquidity has resulted in the liquid inventory of Bitcoin plunging to its lowest ever in terms of months of demand,” the report said. “We estimate that the present Bitcoin sell-side liquidity inventory is only enough to cover the current rate of demand growth for six to twelve months. A declining liquid inventory would support higher prices.”
There is even less liquidity available when exchanges outside of the U.S. are excluded from the calculation.
“The Bitcoin liquid inventory drops to six months of demand if we exclude the Bitcoin on exchanges outside the US,” the report said. “We exclude these exchanges considering that US spot Bitcoin ETFs will only source Bitcoin from US entities.”
According to CryptoQuant founder and CEO Ki Young Ju, sell-side liquidity is now “much lower” than it has been historically relative to demand. ...
www.kitco.com