Bitcoin Drops to $58,000, but a Short Squeeze Could Spark a Rebound

The drop is also hitting ETH and SOL, while derivatives data points to a lot of short positions above the current price. A short squeeze could speed up Bitcoin’s recovery.

Key Takeaways

• Bitcoin fell 5% on Thursday to $58,000, its lowest level since 2024, then recovered slightly to $59,400.
• Ethereum and Solana also dropped about 5.5%, while the Fed may raise rates sooner than expected.
• Derivatives and order book data point to a possible short squeeze, since a lot of liquidation risk sits above the current price.

Bitcoin opened the U.S. trading day on Thursday with a sharp 5% drop to $58,000 (€51,100), its lowest level since 2024. After that quick sell-off, the biggest crypto coin recovered slightly to $59,400 (€52,400), but it is still down 2.5% over the past 24 hours. This move lower spread across the broader crypto market, with Ethereum (ETH) and Solana (SOL) also falling by about 5.5% and similar percentages, respectively.

Impact of Traditional Markets and Fed Policy

The price drop came alongside a sharp jump in Micron Technology shares after strong quarterly results, while the rest of the big tech sector, including the Nasdaq, lost ground. These moves show how closely traditional stock markets and crypto are tied together. At the same time, the surprisingly hawkish stance from the U.S. Federal Reserve under Chair Kevin Warsh is keeping markets on edge. The Fed said it will likely raise rates soon, earlier than expected. That could affect investor sentiment and liquidity, including in the crypto market.

Signs of a Possible Short-Term Bounce

Despite the steep downtrend since October, derivatives market data points to a possible short-term relief rally. Most liquidation risk sits above the current price, which means another drop probably would not trigger a cascade of forced selling. Instead, traders who are short face the risk of liquidation if the price moves higher. Open short volume has even increased, showing that many traders are betting on a break below $58,000 (€51,100), while negative funding rates point to a premium for bearish positions.

The depth of the spot order book reinforces that view: there are about 6,900 BTC in buy orders between the current price and $50,000 (€44,100), compared with only 1,570 BTC in sell orders between the current price and $70,000 (€61,700). That uneven setup could give the market a bullish tilt. In situations like this, smart traders and market makers can profit by pushing the price in the opposite direction, which can lead short positions to close to avoid funding costs and liquidation.

Why This Matters for European Crypto Investors

For European investors, this setup could matter because it points to possible volatility and short-term opportunities. Developments around Fed policy and the interaction between traditional markets and crypto can also affect price moves in Bitcoin and other major crypto assets in Europe. That is why it is important to keep an eye on the derivatives market and liquidity levels when weighing risks and opportunities.