TL;DR:
- Bitcoin is trading at a 41% discount relative to its long-term historical trend.
- The market is experiencing a high-volatility phase driven by forced liquidations in derivatives.
- A “short squeeze” has a 70% probability of occurring if the price recovers key levels.
Following Bitcoin’s recent correction, the price fell below $71,000, erasing all gains accumulated since 2024. Despite this setback, the Bitcoin power-law model suggests that the cryptocurrency is in a zone of extreme undervaluation relative to its historical valuation.
In this regard, analyst David indicated that the asset’s fair value should currently stand at $122,762. This implies a gap of at least $51,000 compared to the current price, representing an unusual 41% discount that the market rarely sustains for prolonged periods.
Derivatives Dynamics and Market Pressure
This price divergence does not necessarily respond to a lack of organic interest, but rather to technical factors in the derivatives markets. The analysis highlights that the decline is being driven by forced flows and liquidations, rather than massive distribution by long-term investors.
On the other hand, positioning data reveals a tense situation: the price fell 20% over the last month, but open interest grew by nearly 7%. This increase in leverage within a context of weakness suggests that high-risk bets are rising, which typically precedes sharp market moves.
Consequently, the $73,000 level is identified as a critical gamma zone. If Bitcoin manages to break above this barrier, volatility could stabilize; otherwise, fluctuations will remain aggressive due to the high exposure of retail and institutional traders.
In summary, the market is cautiously watching the unrealized losses of large entities such as MicroStrategy, whose positions entered negative territory following recent purchases. However, if the price begins a rally, there is a 70% probability of a forced short-position closure, accelerating the recovery.
