Bitcoin exceeded the $42,000 mark on Tuesday as hopes of a new so-called ‘short squeeze’ increased.

BTC/USD fell to $39,600 on Monday, according to data from Cointelegraph Markets Pro and TradingView, the first time it has fallen under $40k since September.

As such, all eyes were focused on the possibility for derivatives markets to ignite another “short squeeze,” Cointelegraph reports. Indeed, with open interest hovering around record highs, despite the recent downturn, a surprise move upwards could have the effect of “squeezing” short positions, leading to a degree of relief for Bitcoin bulls.

This move would be long overdue, according to the latest “The Week On-Chain” newsletter published by on-chain analytics firm Glassnode. Since the record peak of $69,000 back in November, longs have suffered almost continuously, with so-called squeezes happening following a shock outcome in the market.

“Short traders, who have not been punished for taking on increasing risk, may find themselves candidates for a near-term squeeze,” say researchers.

Glassnode added that this event could be magnified due to “tepid demand for spot BTC and futures open interest leverage, which is approaching 2% of the Bitcoin market capitalisation.

“Alongside very oversold indicators in on-chain spending activity, this suggests a short squeeze is actually a reasonably likely near-term resolution for the market,” the newsletter added.

Bitcoin recorded the longest ongoing decline since 2018 in the first week of the year, according to a Yahoo Finance report, with warnings of a serious sell-off from market analysts at the time if the price were to drop under $40,000.

Moreover, other major cryptocurrencies have experienced similar falls since the beginning of the year, with Ethereum, Binance Coin and Solana all edging down by around 20% over the last week.

At the time of writing, the Bitcoin price stands at $41,915.