After hovering below $80,000 for several weeks, Bitcoin finally broke above the psychological level on Monday, May 4th. The top cryptocurrency has seen a significant increase in bullish momentum over the past week, with its price soaring to $82,000.
Although the price of Bitcoin has slowed over the past few days, most indicators suggest that the market leader is in bullish territory, at least in the near term. For example, certain on-chain indicators suggest that BTC price is on the verge of another rise.
Is a BTC short squeeze imminent?
In a recent Quicktake post on the CryptoQuant platform, market analyst CryptoOnchain said: discussed This is an important event in the Bitcoin derivatives market. BTC’s funding rate on Binance has fallen to a multi-year low of -0.002, according to new on-chain data.
The relevant indicator here is the 50-day simple moving average of the Bitcoin funding rate on Binance, the world’s largest cryptocurrency exchange by trading volume. As CryptoOnchain highlighted, this indicator, which measures the regular fees exchanged between traders in the cryptocurrency derivatives market, fell to its most negative level since the COVID-19 outbreak in April 2020.
Typically, a negative funding ratio means that short-term traders (investors with a sell position) pay fees to long-term traders (investors with a long position) because they are betting on the price of a cryptocurrency (in this case Bitcoin). “A prolonged negative funding ratio of this magnitude indicates the absolute dominance of bearish sentiment and aggressive short selling,” CryptoOnchain said in a Quicktake post.
Source: CryptoQuant
CryptoOnchain also noted that history provides some context as to why current funding rates are good for the Bitcoin price. The analyst explained that in the past, when derivatives markets were “skewed towards short selling,” BTC experienced “short selling pressure” providing rocket fuel for further gains.
For context, a short squeeze is a sudden surge in the price of an asset, forcing selling traders to buy to cover losses from the initial surge, which then triggers buying pressure of its own. CryptoOnchain noted that these latest on-chain dynamics strongly suggest that the $80,000 region could be the start of the next upward phase.
Bitcoin price at a glance
As of this writing, the BTC price is around $80,132 and has not changed significantly over the past 24 hours. The top cryptocurrency is up more than 2% over the past seven days, according to CoinGecko data.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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