Notable technical breakouts made by some cryptocurrencies on Friday led to “massive short covering and futures short liquidations at the highest level in over a month,” according to a report by FSInsight, a markets strategy and research firm.
Bitcoin, solana, ether, litecoin and XRP all advanced more than 8% in the early hours of Oct. 1, gains that looked to be technically positive as prices rose above the weekly highs in addition to one-month downtrends, FSInsight said.
Short covering occurs when investors who are positioned short – that is they’ve sold assets betting on further declines – are forced to cover their bearish bets by buying in the market as prices rise, leading to further gains.
Momentum remains positive on weekly charts and has also turned to positive on daily charts following Friday’s move higher. Bitcoin has “resolved its 10-day sideways range by exceeding the downtrend which had been in place since early September.”
It is possible that bitcoin is starting off its “traditionally bullish 4Q seasonal rally,” FSInsight said. The firm’s first upside target is $52,956 – the September high – followed by $64,895. Momentum may be overbought on an hourly basis but “dips are likely buyable” daily momentum is not overbought, FSInsight said.
Bitcoin was trading lower about $47,500 as of publication time.