In the early hours of July 6, Bitcoin (BTC) surged close to the $64,000 mark, peaking at $63,900 on CoinGecko, following a weekend rally that liquidated hundreds of millions of dollars in short positions.
This dramatic upward shift came after Bitcoin dipped to a low of $58,293 on July 1. A weaker-than-expected jobs report altered rate hike expectations as the week began, allowing Bitcoin to regain lost ground.
Weak Labor Data Leads to a Short Squeeze
Thursday’s US Nonfarm Payrolls report set off the rally. The report indicated that only 57,000 jobs were added in June, a stark contrast to forecasts. This shortfall decreased the likelihood of an imminent Federal Reserve rate hike, contributing to Bitcoin's price recovery. Additionally, earlier comments regarding inflation risks by Warsh had already seen Bitcoin gaining traction.
With declining Treasury yields and a weaker dollar, the opportunity cost of holding Bitcoin diminished, further driving the asset's recovery from a dismal June. Furthermore, the positive momentum was buoyed by the turnaround of spot Bitcoin ETFs, which marked an end to a 10-day streak of redemptions despite still navigating through record outflows of $4.5 billion in June.
Short Sellers Unexpectedly Liquidated
The spike in Bitcoin's price caught short sellers off guard, resulting in over $450 million worth of liquidations across the derivatives market as Bitcoin soared past $62,000. The price movement mirrored a broader dynamic, where forced buybacks elevate the price into a new level of short positions.
On the same day, Ether rose approximately 4%, while over the last week, it gained around 10%. In addition, Solana's notable increase of nearly 19% marked it as the strongest performer among major tokens. However, institutional flows have yet to fully validate this recent surge, as ETFs recover from a historically poor month.
Looking ahead, whether this short squeeze will establish a sustainable trend remains to be seen. Typically, forced short-covering leads to rapid price changes rather than enduring demand. As the market moves into the third quarter, liquidity is expected to decrease, which could affect price movements in either direction.
