$15 billion Bitcoin time bomb

Bitcoin (BTC) suffered a sharp selloff last week, losing almost 1,000 millionaires a day as prices slid to as low as $109,000. 

The drop was followed by an altcoin rebound on Monday, September 29, as more than $260 million in BTC short positions were liquidated, fueling gains in Solana (SOL), Dogecoin (DOGE), Ethereum (ETH), and XRP, which also saw over $6 billion in inflows overnight. 

With Bitcoin’s total capitalization recovering to $2.23 trillion and the price seeing a 2.5% uptick on the daily chart ($112,042 at press time), though, investor sentiment appears to be somewhat better at the start of the new week.

However, a large shadow still looms over the market, as there are another $15 billion in Bitcoin shorts ready to be liquidated if the price climbs back to $120,000, according to data retrieved by Finbold from CoinGlass.

Bitcoin short squeeze alert

As the chart above suggests, a large concentration of leveraged positions sits below the $120,000 threshold. With Bitcoin edges closer to that zone, the risk of a short squeeze increases.

In simple terms, the chart highlights just how much capital is positioned against the cryptocurrency. Any sustained upward move would force these shorts into losses, and if the rally is sharp enough, exchanges could begin liquidating them automatically.

Such liquidations typically trigger additional buy orders, as traders must cover their positions. This influx of forced buying often amplifies the rally, creating a cascade effect similar to the short squeezes witnessed in 2020 and 2021.

Is Bitcoin on its way to recovery?

Bitcoin’s Monday rebound came as gold hit an all-time high of $3,800 per ounce, underscoring demand for safe-haven assets.

Macro signals also remain supportive. For instance, while U.S. GDP already grew 3.8% in the second quarter, the Atlanta Fed’s GDPNow model now also projects an additional 3.9% growth for Q3.

However, even though the positive statistics have somewhat propped up risk assets, the Fed is still debating potential rate cuts, which is unusual during economic resilience.

Moreover, the ongoing panic regarding a potential government shutdown has raised concerns that key economic data releases, such as the nonfarm payrolls report, might be delayed, adding further uncertainty to the market. 

While the worst-case scenario might not directly impact Bitcoin, a change in overall global market mood could weigh on cryptocurrencies as an asset category, leading to downward renewed momentum.

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