Bitcoin Breaks Above $80,000, but Wintermute Says Rally Is Largely a Short Squeeze
Summary
- Wintermute said Bitcoin broke above $80,000 and its 200-day moving average (MA), but the rally appears to have the characteristics of a short squeeze because spot trading volume has fallen to its lowest level in two years.
- Wintermute said indicators including open interest and funding rates point to the possibility of another short squeeze, but a sharp price correction could follow if spot buying does not return.
- Wintermute cited spot Bitcoin ETFs, Morgan Stanley's Bitcoin ETF, Bitcoin holdings on exchanges, the relative strength index (RSI), $85,000, real-world assets (RWA), tokens tied to AI computing, the U.S. consumer price index (CPI) and the nomination process for Kevin Warsh as Federal Reserve chair as key variables.
Forecast Trend Report by Period
Bitcoin climbed above $80,000 and cleared a key technical resistance level, but the latest rally appears to be driven more by a derivatives-led short squeeze than by spot buying, according to Wintermute.
In a market report published May 12, the crypto trading firm said Bitcoin rose to about $83,000 and moved above its 200-day moving average. Even so, the structure of the advance remains far from a healthy, spot-led rally.
Open interest rose by about $10 billion over the past month, increasing to $58 billion from $48 billion, Wintermute said.
By contrast, spot trading volume has dropped to its lowest level in the past two years.
That suggests Bitcoin's gains are being fueled by forced buying tied to short liquidations.
As Bitcoin moved above $70,000, investors remained unconvinced by the rally and continued to build short positions, Wintermute wrote. Once liquidations began, short-covering buying accelerated the price increase.
Funding rates still show a bias toward short positioning, leaving room for another short squeeze. But short covering is different from conviction-driven buying, the firm added.
Wintermute was more constructive on the longer-term outlook.
Spot Bitcoin ETFs have attracted a combined $623 million of inflows recently, according to the firm. Morgan Stanley's Bitcoin ETF in particular brought in $194 million in its first month without a single day of net outflows.
Bitcoin holdings on exchanges also remain at their lowest level in seven years, Wintermute said.
In the short term, however, whether spot demand recovers remains a key variable.
If spot buying does not follow once the short squeeze runs its course, prices could quickly face another correction, Wintermute said. The relative strength index, or RSI, is also entering overbought territory.
Bitcoin could still climb toward $85,000, the firm added. But the risk-reward of chasing the rally at current levels is not especially compelling.
In the altcoin market, gains are becoming more differentiated and theme-driven rather than lifting the market as a whole, Wintermute said.
In real-world asset, or RWA, tokenization, Centrifuge is attracting institutional interest, the firm said. Tokens tied to AI computing are also advancing on higher platform usage and expectations for deflationary token structures.
Separately, Wintermute said this week's U.S. consumer price index report and the nomination process for Kevin Warsh as Federal Reserve chair could be key drivers of market volatility.
