Bitcoin plunges to $58,000 as crowded short bets set up squeeze

Bitcoin fell as much as 5% to $58,000 on Thursday, its weakest since 2024, before recovering to $59,400 as short positioning reached extreme levels.

"The liquidation heatmap shows clustered risk above current prices, not below, meaning a move lower is unlikely to trigger forced selling — the real danger is for those positioned short," according to Coinglass data.

Open interest rose 0.28% over the past 24 hours even as the price fell about 3%, showing traders are adding to bearish bets rather than closing them. Funding rates have turned negative, indicating the market is paying a premium for downside exposure. Spot market depth reinforces the asymmetry: 6,900 BTC ($409 million) in bids sit between the current price and $50,000, compared with just 1,570 BTC ($93 million) in resting sell orders up to $70,000, according to CoinGlass.

The setup mirrors classic short-squeeze conditions — an overcrowded trade with thin supply above and deep demand below. If Bitcoin reclaims the $60,000 level, short sellers may be forced to cover, accelerating any upside move. The key risk to the downside remains a break of $58,000, which could open a path toward $50,000.

The macro backdrop has been unforgiving. The Federal Reserve under new Chair Kevin Warsh delivered an unambiguously hawkish stance last week, with traders now pricing in at least one rate hike by year-end, according to CME Group's FedWatch tool. Thursday's Personal Consumption Expenditures report is expected to show inflation accelerated to 4.1% year-over-year in May, the highest since 2023, driven largely by oil prices that have since retreated.

Bitcoin's decline has also been compounded by weakness in Michael Saylor's Strategy. MSTR fell to a multi-year low of $88 on Thursday, down 7%, while the company's STRC preferred stock traded at $76, well below its $100 par value. Strategy sold Bitcoin for the first time in four years last week, rattling institutional confidence.

The broader crypto market followed Bitcoin lower. Ether dropped 5.5% to around $1,550, while Solana and Dogecoin posted similar declines. Total liquidations reached $1.3 billion over the past 24 hours, with more than 210,000 traders wiped out, according to CoinGlass. The single-largest liquidation order, worth $19 million, occurred on Binance.

This article is for informational purposes only and does not constitute investment advice.