Key Points
- Despite being overbought, Bitcoin sell pressure remains weak due to strong market confidence.
- Negative funding rates and a surge in short positions could lead to a Bitcoin short squeeze scenario.
Despite reaching recent highs, the Bitcoin market continues to be dominated by bulls. Despite being overbought, the sell pressure remains weak. The resilience of Bitcoin holders is one of the reasons for this.
Market Confidence and ETF Inflows
The market’s confidence has not waned following the recent peak. This is evidenced by the substantial inflows into Bitcoin ETFs over the last 24 hours. ETF flows are a relatively reliable indicator of market confidence. According to Eric Balchunas of Bloomberg, Bitcoin ETFs saw record-breaking inflows of $1.4 billion in a single day.
This influx into ETFs could potentially push Bitcoin to new heights. A recent analysis by CryptoQuant examined the possibility of a short squeeze scenario. The analysis found that while Open Interest was high, the funding rates were negative.
Shift in Market Sentiment
Historically, negative funding rates signify a shift in market sentiment, specifically towards a bearish outlook in the derivatives segment. This shift is supported by Coinglass’s BTC long/short ratio, which shows that shorts have outnumbered longs in the last three days.
This increase in short positions is likely due to derivative traders expecting the previous top to act as a resistance level. However, if the price rises, these shorts could face liquidation. Meanwhile, Bitcoin’s Open Interest seems to be stabilizing after reaching a new all-time high.
Despite signs of potential bullish exhaustion, the amount of Bitcoin leaving exchanges is still slightly higher than the amount entering. This suggests that demand is still favoring the bulls, and the price could still rise.
While there is still some bullish momentum preventing bears from taking over, this does not necessarily mean that the situation will remain the same. The struggle of the bulls to push the price higher could indicate a cooling demand, possibly paving the way for a bearish retracement once sell pressure starts to gain traction.
