Bitcoin price surges to “$26,000” in USDC basis – How high can the BTC short squeeze go?

Bitcoin (BTC) refused to let the $20,000 support finally die on March 11 as the weekend turned into a battle for lost ground.

BTC/USD 1 Hour Candlestick Chart (Bitstamp). Source: TradingView

Bitcoin shakes off USDC-Depeg

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD circling $20,200 at the time of writing.

A brief overnight drop below $20,000 was short-lived and sentiment appeared more stable as initial panics over US bank stability eased.

The Silicon Valley Bank (SVB) collapse that followed Silvergate and dealt a new blow to some crypto firms nevertheless continued to play out.

At the center of the debacle was payments technology company Circle, which revealed overnight that it had part of the reserve funds for its stablecoin, USD Coin (USDC), at SVB.

The USDC immediately began slipping off its US dollar peg and was redeemable for just $0.91 at the time of writing. At one point, Bitcoin was worth more than $26,000 in USDC on major exchange Kraken.

BTC/USDC 1 hour candlestick chart (Kraken). Source: TradingView

“If USDC is only 90% hedged, the equilibrium price is NOT $0.90. The equilibrium price is ZERO,” responded Cory Klippsten, CEO of Swan Bitcoin, adding:

“Everyone has an incentive to redeem asap for $1. You don’t want to be in the last 10% when all the money’s gone.”

Others believed that the situation was manageable and that USDC, the second largest stablecoin by market cap, would not fail entirely.

In a tweet, Circle said it has five other banking partners to manage its USDC cash reserves.

Funding rates mimic FTX sentiment

Away from the USDC, nervousness among traders lingered as expected.

Related: Circle’s USDC instability is causing a domino effect on DAI, USDD stablecoins

Average funding rates have been the most negative since the FTX aftermath of November 2022, indicating strong belief that further losses could still impact Bitcoin.

Average bitcoin funding rate chart. Source: coin jar

However, analyzing the implications, commentator Tedtalksmacro argued that an overwhelming bearish bias could fuel a classic BTC/USD “short squeeze” to the upside.

“The market remains very short here. And that could provide fuel for BTC to test at least 21.4k in the near term,” reads part of a tweet.

Tedtalksmacro added that a squeeze is already “underway” based on Bitcoin’s rebound from multi-week lows below the $20,000 mark.

Other popular market participants favored a return lower in the near term.

“Amid today’s madness, bitcoin remains good. I anticipate another drop to the $19,200 provisional support zone,” Crypto Tony told his followers.

Annotated BTC/USD chart. Source: Crypto Tony/ Twitter

The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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