Bitcoin Price Hits Lowest Level Since 2024: Is a Massive Squeeze Next?

Key Insights:

• Bitcoin price crashed 5% to $58,000 before bouncing back.
• Crowded short positions and fewer sell orders point to a possible short squeeze.

Bitcoin (BTC) price experienced a sharp decline early Thursday, during the U.S. session, declining 5% to $58,000 in pre-market trading. It was the weakest level since 2024. But behind that headline number, derivatives data is telling a more complicated story.

It suggests that traders betting on Bitcoin price falling even further might actually be the ones who get caught off guard in a painful reversal.

Bitcoin Price Chart | Source: TradingView

The drop also pressured the broader crypto market. Ethereum fell to around $1,550, down 5.5%, while Solana and Dogecoin posted similar declines. BTC price has since recovered from its low and is currently trading near $60,000.

What is Driving the Bitcoin Price Decline

Two separate forces are operating simultaneously in opposite directions within the tech sector itself. Memory chipmaker Micron rallied after posting strong earnings Wednesday evening, but that was the exception. Most of the big tech names fell, and even the Nasdaq itself slipped.

Source: FedWatch

The bigger problem is the Federal Reserve. Fed, in its recent meeting, surprised everyone by sounding far more hawkish than expected, as officials signaled that their next move is likely a rate hike. This shift has weighed on broader risk assets and pressured the Bitcoin price.

Derivatives Market Tells a Different Story

This is where the Bitcoin price decline gets more interesting. According to CoinDesk’s review of CoinGlass liquidation data, the liquidation risk was above the price.

In simple terms, it means a further drop probably wouldn’t have triggered a chain reaction leading to panic selling. This creates a greater risk for people betting on a further BTC price decline.

Bitcoin Liquidations | Source: CoinGlass

According to CoinDesk, open interest increased around 0.28% over the past 24 hours while the price fell by around 3%. It shows traders aren’t closing their short positions as the price drops. They’re adding to them, betting that Bitcoin might break decisively below the $58,000 support level.

Funding rates have also gone negative. It’s another sign that traders are now paying a premium just to hold their short positions, a quite expensive bet to sustain over time.

The order book also supports this. According to CoinGlass spot market depth data, around 6,900 BTC, worth $409 million, buy orders are placed between the current price and $50,000.

On the other hand, only 1,570 BTC, worth around $93 million, sell orders are placed between the current price and $70,000. That means more buying interest below the market price than selling interest above it. This creates a gap between supply and demand, which favors a bullish direction.

Is Short Squeeze Possible?

Taken together, this setup signals a crowded short market, with many traders betting on a Bitcoin price decline. This increases the risk of a sharp reversal if short sellers begin to close their positions.

Usually, whenever the market becomes crowded, market makers and experienced traders target it by pushing the price in the opposite direction. That forces short sellers to close their positions to avoid the risk of liquidation.

As short positions begin to close, this further increases upward pressure on the price. This whole mechanism is known as a short squeeze.

But none of this guarantees the expected reversal. There is a difference between what is fact and what is interpretation. Open interest, order book depth, and funding rates are publicly available data.

Whether they actually trigger a squeeze in the coming hours or days is an interpretation, not a fact. Markets can stay irrationally positioned for longer than expected. Therefore, this setup is a possibility worth watching, not a sure shot that the market will reverse.

What Does This Mean for the Broader Bitcoin Price Trend?

Keeping this near-term setup aside, BTC price remains in a sharp downtrend. A short squeeze, if it plays out, would represent a short-term bounce within that larger decline rather than a reversal. The macro environment, such as expectations of a Fed rate hike, remains more important than the technical short-squeeze mechanism alone.

For now, the next developments to watch are whether $58,000 holds as support, whether short positions continue to build, and whether the Fed’s policy path shifts again. These three developments will probably matter more in determining the direction of Bitcoin price in the coming weeks.

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