Bitcoin Price Prediction: BTC ‘Long Squeeze’ Could Result in Drop to $90K

We have been warning for a few weeks that momentum readings have reached extreme levels and the market has already cooled off to some extent.

However, Bitcoin had managed to maintain its bullish structure until yesterday, when a 2% drop pushed the token below its second-best higher high.

$650 million worth of long positions have been wiped out in the past 24 hours across the entire crypto market. Nearly a third of that total corresponds to BTC longs.

This is not at all unexpected as open interest in Bitcoin futures surged to a new record of 726,450 BTC yesterday.

Retail traders may have got too excited by the top crypto’s push to a new all-time high. The amount of liquidations seen in the past 24 hours after a 4.5% weekly retreat indicates a highly leveraged market that is in dire need of a strong correction.

Long/Short Ratio Reaches Extreme Levels

By May 25, Bitcoin’s 24-hour long/short ratio stood at 1.0284. The market has corrected this imbalance now and short sellers are heavily positioned for a big upcoming drop as this ratio has plummeted to 0.9384.

Two scenarios can unfold at this point. Either whales pull a strong bear trap and prompt a big squeeze that pushes BTC to a new all-time high or a strong single-day correction prompts a long squeeze and results in a big decline for the token.

One metric in particular favors a bearish short-term outlook for Bitcoin. The long/short ratio of accounts exposed to BTCUSDT in Binance.

According to data from CoinGlass, 6 out of 10 accounts are long BTCUSDT at the moment – the highest this metric has reached since the month started.

The logical move, and the most profitable one for the market’s ‘smart money’ at the moment, would be to flush out those excess longs and trigger a big move downwards by blowing up their stop orders.

The downward risk at this point is significant as “one-sided” markets are prone to experience dramatic corrections rapidly. One good recent example is the first quarter’s bear market, which turned into a bull market and pushed BTC to a new all-time high in just a month.

This Sell Signal Could Confirm a Bearish Outlook

Bitcoin’s daily chart shows two strong sell signals. The first is a trend line break that has already been retested by the token’s second attempt to make a new all-time high on May 26 and May 27.

In addition, the price action has broken its bullish structure as it dropped below BTC’s second-best higher high.

For now, BTC is finding support at its 21-day exponential moving average (EMA). However, these latest bearish moves along with stretched momentum indicators and indications of an over-leveraged one-sided market favor a bearish Bitcoin price prediction.

If this move is a mere ‘mean reversion’ and not necessarily the end of this latest bull market, BTC could drop to $90,000 in a matter of days.

This happened already once when BTC reached its all-time high of $109,312 back in January. A bear market started back then and the token reverted to its 200-day EMA just a month later.

The key sell signal to watch at that point was a ‘death cross’ between the 9-day and 21-day EMA. This has not yet occurred so traders should keep an eye on these two indicators in the next few days.