A classic short squeeze unfolded as derivatives positions that had been heavily skewed toward fear were unwound all at once, sending Bitcoin (BTC) surging more than 11% in a single day due to buying pressure triggered by the liquidation or covering of short positions.
According to CoinMarketCap, a cryptocurrency market tracking site, on February 6 (local time) Bitcoin rose 11.22% over 24 hours to trade at $70,255.59, leading a broad market rebound. Over the same period, the total cryptocurrency market climbed 10.02%, while Bitcoin showed a high 97% 24-hour correlation with the S&P 500, the benchmark index of the U.S. stock market, reflecting a macro-aligned “relief rally.”
The key driver behind this sharp rally was identified as a derivatives-driven short squeeze. Market data showed funding rates falling to as low as -0.0099%, signaling excessive accumulation of bearish bets. As prices began to rebound, cumulative liquidations over 24 hours surged to $485.93 million. In particular, short position liquidations increased 63.67% from the previous day, amplifying upward pressure through forced buybacks and covering by short sellers.
From a technical perspective, conditions for a rebound had also been in place. The 14-day Relative Strength Index (RSI) slipped to 15.73, entering an extreme oversold zone that has historically served as a precursor to short-term technical rebounds. Analysts noted that the combination of excessively accumulated selling pressure and derivatives market liquidations brought a short-term pullback reversal into reality.
A key inflection point for the short-term price structure was cited at $69,952, corresponding to the 78.6% Fibonacci retracement level. If Bitcoin manages to hold this level, the market expects a rebound toward the $75,000–$80,000 range. Key resistance levels include $75,917 at the 61.8% Fibonacci level and $80,107 at the 50% retracement. Conversely, if prices fall below $69,952, some caution that a retest of the recent low at $62,350 cannot be ruled out.
While experts characterized the move as a typical “relief rally” combining an oversold bounce with a short squeeze, they stressed that confirmation of a full trend reversal is still pending. In the near term, a daily close above $72,000 and a recovery of the 7-day simple moving average at $75,681 are seen as critical for further upside. Additionally, if funding rates turn positive again, it could signal whether the short squeeze has ended and a new phase of long leverage inflows has begun.
*Disclaimer: This article is for investment reference only, and no responsibility is taken for any investment losses incurred based on it. The content should be interpreted solely for informational purposes.*
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