Bitcoin price is already showing signs of recovery after finding support above $108,000 following the market flash crash. In the weeks since, there have been several notable developments surrounding the largest cryptocurrency by market capitalization, suggesting the price could be ready for another rally. This was highlighted by Luca, a cryptocurrency analyst at the
Bitcoin indicators are heading towards an increase.
In this post, Luca outlines a number of factors that suggest that the price of Bitcoin will likely continue to rise, possibly leading to a war between bears and bulls. The analyst pointed to the decline that plagued the cryptocurrency earlier in the week, explaining that crypto traders initially thought it was due to buying pressure in the market.
However, one thing stood out that suggested this was not the case. First, the funding rate is trending downward, which usually happens when long traders fail. However, this often coincided with a decline in open interest, which in practice did not occur.
While the market was falling, open interest actually increased. Bitcoin outstanding has recovered from its all-time high of $92 billion in early October, but there was a notable spike earlier in the week, according to Coinglass data.
Open interest increased from about $71 billion over the weekend to more than $76 billion on Tuesday. Pointing this out, Luca explained that this only means one thing. In other words, short-term traders were actually increasing their bets that the price of Bitcoin would continue to fall.
Given this, the plunge in Bitcoin price earlier in the week appears to have been a direct result of selling positions building up rather than long traders being pushed out. This means that the majority of traders are currently betting that prices will continue to fall.
The interesting thing about developments like this is that they are often a harbinger of the next upward move. As seen in the flash crash of October 10th, markets rarely move in the direction most expect. Therefore, with more and more traders expecting Bitcoin price to crash, it is likely that the price will actually rise.
“Historically, this kind of setup often fuels the next major rally because excessive short exposure creates the perfect conditions for a short squeeze.” Luca explained in his post: With Bitcoin still trading relatively high, a short-term squeeze could give the price the momentum it needs to hit new all-time highs.
Featured image by Dall.E, chart by TradingView.com
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