Bitcoin short squeeze, will it rebound strongly after Christmas?
BTC rose 4.16% yesterday.
Open interest increased, and the financing rate decreased, indicating that there are quite a few short sellers trading Bitcoin.
Yesterday, Bitcoin saw a slight increase along with the holiday atmosphere, now priced at $98,056, up 4.16% from the previous day.
Before Christmas, Bitcoin surged from a low of $93,461 to a high of $99,419. This increase has analysts discussing BTC's performance after Christmas.
Cryptoquant analyst Traders Oasis mentioned that BTC might consolidate during Christmas, and as the demand for short positions increases, there could be a wave of market activity.
Significant increase in demand for Bitcoin short positions
Traders Oasis stated that institutional demand has been insufficient in recent weeks, leading to a correction in Bitcoin.
He analyzed that the Coinbase premium index did not follow the price increase, which is why it fell. However, he predicts that once the index enters negative territory, the market will rise again.
He also noted that the financing rate has decreased, which is a good sign, and open interest has also increased significantly.
With the decrease in funding rates and the increase in open interest rates, this indicates that many people are shorting. When there are many short sellers, it suggests they believe prices will fall.
However, if more buyers enter the market, the demand for short trading increases, and the shorts could get squeezed. When this squeeze happens, there will be even more buyers, leading to a stronger rebound.
Look at the past three days, the demand for Bitcoin has been robust. The BTC capital flow ratio rose from 0.084 to 0.137.
An increase in the capital flow ratio indicates that more money is being invested in Bitcoin. This is a good sign, showing that people are willing to invest in BTC. As a result, prices rise because there are more buyers.
Furthermore, with more inflow of money, the amount of BTC in exchanges decreases, making it scarcer. As more people buy cryptocurrencies, it becomes scarce, and the inventory-to-flow ratio increases as proof.
With Bitcoin becoming scarce, prices rise. Increased demand and decreased supply naturally lead to higher prices.
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