Although the price has pulled back, the percentage of Bitcoin bulls has still risen—what else needs attention?
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Despite a significant drop in the price of Bitcoin (BTC), the long positions have increased, indicating that traders are caught in a bull trap. In fact, when BTC's price fell to around $92,000, the long position ratio on Binance and OKX significantly increased.
This trend suggests an impending turning point, where excessive bullish sentiment may reverse, leading to potential price recovery as shorts enter and longs exit.
These cycles typically precede major market reversals. If the long position ratio peaks and begins to decline, the sluggishness could bring some rebound to BTC.
This may indicate a shift in market sentiment, potentially triggering shorts in the process. It is worth noting that, in addition to the rise in the long percentage, BTC is also showing other signs of rebound on the charts.
Bitcoin's funding rate
As the price rises, the overall funding rate has surged significantly—this is a strong indication of bullish sentiment. Subsequently, the funding rate remains high while Bitcoin's price begins to fall—indicating market overexpansion.
Traders may establish long positions during the rate hike, but the market cannot bear higher buying pressure, leading to a pullback.
The pullback may stimulate profit-taking or incite shorts to take advantage of high funding rates, thereby creating selling pressure.
Nevertheless, the sustained positive funding rate suggests potential market confidence, although caution may be necessary. If the funding rate maintains or reverses, it may signify potential market trends. The stability or reversal of the funding rate could determine Bitcoin's short-term trajectory.
Demand encounters obstacles
Bitcoin saw a significant surge, rising from $40,000 to $74,000 by the end of the first quarter of 2024.
This spike was driven by increased demand, as evidenced by a significant drop in over-the-counter (OTC) desk inventories. During this period, OTC desks reported the largest monthly inventory decline of the year, decreasing by 26,000 BTC—an indication of tightening supply.
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