BTC has surged by 4.16% over the past 24 hours.
Rising open interest and declining funding rate suggest a high demand for Bitcoin’s short trade.
Over the past 24 hours, Bitcoin (BTC) experienced small gains as the markets enter the Christmas mood. As of this writing, Bitcoin was trading at $98,056, marking a 4.16% increase over the last day.
On Christmas Eve, Bitcoin surged from a low of $93,461 to a high of $99,419. This uptick has left analysts discussing BTC’s performance post-Christmas.
Cryptoquant analyst Trader Oasis has suggested that BTC will move sideways during the Christmas week, followed by a distribution movement as demand for short positions rises.
Bitcoin’s Demand for Short Positions Soars
According to Trader Oasis, Bitcoin has endured a correction in recent weeks due to a lack of institutional demand. He posited that the Coinbase premium index did not accompany the price rise, leading to a retrace. However, he expects the market to continue rising, as the index has entered negative territory.
The potential continuation of this rise is supported by funding rates and open interest. The funding rate has declined, a positive sign for a bull market while open interest has surged over the past days.
When the funding rate declines while open interest rises, it indicates investors are opening short trades, signaling expectations of price drops. However, increased demand for these short trades could lead to a short squeeze as buying pressure mount. This increase attracts more buyers, creating a self-reinforcing rally.
This demand for Bitcoin has been evident over the past three days, with the BTC fund flow ratio spiking from 0.084 to 0.137. A rising fund flow ratio implies more money is being invested into Bitcoin, serving as a bullish signal suggesting investor willingness to allocate more capital to BTC, leading to price increases due to heightened buying pressure.
Additionally, increased inflow means more BTC is moving off exchanges, raising scarcity. As more traders shift to buying the crypto, it becomes scarce, evidenced by a rising stock-to-flow ratio.
When Bitcoin becomes more scarce, prices typically rise as higher demand coupled with low supply drives prices up.
Read Bitcoin’s (BTC) Price Prediction 2024-25
What’s Next for BTC?
With investor demand for short trades rising, these traders may face a short squeeze, where the demand for shorting causes prices to drive upward.
If demand remains constant while supply falls, as observed, Bitcoin could reclaim the $100k resistance post-Christmas. However, if the crypto continues to trade sideways, it might drop to $96,600.
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