Analyst: The crypto market is slightly recovering, but there might be a short squeeze

PANews reported on August 6, according to The Block, signs of a tentative recovery emerged in the cryptocurrency market after severe turbulence on Monday when over $1 billion worth of leveraged positions in cryptocurrencies were liquidated and the value of major tokens plummeted by up to 20%. Coinbase researcher David Duong stated that Tuesday's market conditions suggest there is potential for short squeezes as trading activity increases on centralized exchanges. "We believe the market will continue to be volatile in the short term, but shorts may get squeezed here, which could lead to a rebound in the market over the next few days," said Duong. Currently, long and short position liquidations within past 24 hours are roughly equal. According to Coinglass data, out of total $425 million liquidation amount at time of writing this article, approximately $212 million was long positions slightly higher than $212 million was short positions.

Coinbase researchers emphasized that specific factors are still affecting cryptocurrency markets. Duong added: "Genesis is distributing Bitcoin and Ethereum physically as part of its bankruptcy liquidation plan. The unwinding yen carry trades might also affect Mt.Gox creditors' current decision about receiving Bitcoins."

Duong also noted that recent declines in crypto markets do not represent new long-term trends or start of a new market cycle. He said: "The current pullback does not signify beginning of a new market cycle for cryptocurrencies; instead it aligns with our defensive strategy adopted during Q3 2024 and more constructive outlook towards Q4 2024 despite testing our conviction."