Bitcoin tests $78,000 resistance as short-squeeze risks mount, altcoins rally

The crypto market is on the brink of a major breakout with bitcoin BTC$78,133.32 trading at $78,000, the level it failed to breach on Friday and a price it has not topped since January.

A break above this level would trigger upside momentum to $80,000 as $180 million worth of futures positions are due to be liquidated between $77,000 and $78,000, according to CoinGlass' liquidation heatmap.

However, there is also a $71 million long position that will be liquidated if the price fails to gain and descends back below $77,300, creating a defensive trading environment on both sides.

The market is higher after U.S. President Donald Trump extended the ceasefire in Iran, saying that country's government was “seriously fractured.”

Nasdaq 100 futures and S&P 500 futures rose by 0.77% and 0.6%, respectively, since midnight UTC following the announcement, suggesting improving broader market sentiment.

Derivatives positioning

• BTC's breakout to $78,000 caught the bears off guard, leading to $286 million in marketwide short liquidations on derivative exchanges. Longs, or bullish plays, suffered liquidations of just $132 million.
• Still, overall crypto futures open interest (OI) has increased by over 4% to $126 billion in 24 hours. Notably, OI grew across the major tokens, including bitcoin and ether (ETH), outpacing spot price gains, indicating renewed capital inflows and rising demand for leverage.
• Funding rates have flipped positive for most tokens, including BTC, indicating a renewed bias for bullish bets. The 24-hour cumulative volume delta also paints the same picture.
• M token stands out with annualized funding rates above 200%, signaling an overheated market crowded with bullish bets. Meanwhile, the HYPE and XML markets show a bias toward bearish short plays.
• Broadly speaking, crypto futures activity suggests scope for further market gains. Also supporting the bull case are bitcoin and ether's 30-day implied volatility indices, which remain under pressure, pointing to market calm.
• On Deribit, bitcoin and ether risk reversals continue to print negative values across all time frames. That's a sign of the richness of protective put options relative to calls.
• Block flows featured investor bias for call ratio spreads, a strategy used by traders to profit from a moderately bullish, sideways or slightly rising market. Traders also chased bitcoin and ether straddles, a volatility strategy.

Token talk

• The altcoin market was also in a buoyant mood on Wednesday, with all major CoinDesk indexes posting gains of at least 1.5% since midnight UTC.