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Bitcoin bears need to be careful moving forward as the derivatives data highlights the chance of Bitcoin Short squeeze that can trigger sharp rallies in the world’s largest crypto asset.
Everyone is closely watching the opening of the US market on Wednesday, August 21, with eyes on the FOMC meeting. Today is going to be crucial for the global financial market as well as the crypto market. In a note to clients, the Goldman Sachs Economics Research team said that the US jobs data could be erroneous.
Later today, the US Bureau of Labor Statistics (BLS) will publish a preliminary estimate of the benchmark estimate of the monthly nonfarm payrolls (jobs report) for the period of April 2023 to March 2024. This report usually comes in the summer of every fall.
Market observers stated that the BLS report will reveal that the job growth was slower than the previous estimates, in the year to March. In its market update on Tuesday, ignalPlus, a tech firm focused on democratizing crypto options, wrote:
“On Wednesday, the Federal Reserve will receive revised job growth figures, which may reveal that job growth from last year through early this year was weaker than previously estimated.”
On the other hand, banking giant Morgan Stanley is also expecting a downward revision in payroll data with a drop of 600,000 jobs from current reports. This substantial revision can reignite recession concerns triggering a shift from risk assets, including cryptocurrencies, with investors seeking safer alternatives.
Besides, the Goldman Sachs team is predicting a downward revision in nonfarm payroll growth, which averaged 250,000 jobs per month between April 2023 and March 2024. the upcoming figure could lower this revision to 165,000-200,000 jobs per month.
But Goldman Sachs believes that this part of the revision could be inaccurate considering the “true” pace of employment growth during that period to be closer to 200,000-240,000 jobs per month.
Bitcoin Bears Should be Watchful
While the release of the macro indicators could trigger Bitcoin price volatility in the short term, the bears need to be careful moving ahead. The latest report from K33 Research shows the possibility of a Bitcoin Short squeeze that can trigger sharp rallies in the world’s largest crypto asset.
Analysts at K33 Research are looking at the Bitcoin derivatives data such as the BTC funding rate for the perpetual futures to predict the bullish or bearish momentum. As of August 20, K33 noted that the seven-day average annualized funding rate has dropped to the lowest since March 2023, to minus 2.5%. The analysts noted:
“Perpetual swap funding rates have averaged at negative levels over the past week, while open interest has sharply increased. This suggests aggressive shorting, structurally creating a setup ripe for a short squeeze.”
Besides, K33 Research also pointed out that notional open interest in the perpetual market has surged by 29,000 Bitcoins over the last week. Lunde and Zimmerman noted that a rapid increase in open interest combined with a negative funding rate is a relatively uncommon occurrence.
