Key Points
- Bitcoin’s long positions have surged past $90k, indicating high investor expectations.
- A potential long squeeze could occur as demand increases but price momentum weakens.
Bitcoin [BTC] has seen a rally past $95k over the past week, sparking an increase in investor appetite. The demand for long positions has correspondingly soared.
In the last day, Bitcoin’s Funding Rate turned positive, with longs being dominant above 90k. This suggests that investors anticipate the upward trend to continue, possibly hitting the $100k-mark. However, the surge in demand for longs could become an issue as price momentum weakens.
Market Conditions and the Risk of a Long Squeeze
Bitcoin’s Open interest saw a $1 billion increase in 24 hours, rising from $31 billion to $32 billion. This typically indicates more traders entering the market to open new positions, in this case, long positions. Despite the rise in Open Interest and funding rates, the crypto’s price has remained around the $94k range for the past 2 days.
Bitcoin’s spot cumulative volume delta has remained within negative territory. When the CVD declines as the Open Interest rises, it suggests that market buyers are becoming weak, while longs continue to increase. This drop in buying pressure leads to low demand, providing an opportunity for speculative investors to exit the market to maximize profits.
Under these market conditions, a risk of a long squeeze emerges. Alphractal suggests that Bitcoin may experience a long squeeze in the next few hours due to market anxiety. This could result in a sharp drop on Bitcoin’s price chart and potentially risk a drop below $90k where longs dominate.
Is a Long Squeeze Inevitable for BTC?
The increasing funding rate amidst weakening price buying momentum is concerning. If the trend continues, a long squeeze could occur with the price falling below $90k.
However, there may be some signs of hope for the market, particularly from short-term holders. The short-term holder realized profit/loss ratio climbed to +1.2%, indicating a key psychological shift. Historically, flipping this ratio positive has signaled the start of a sustained recovery on the charts.
With STH holders in profit, they bring positivity to the market and could help stabilize the price. When this group is in profit, selling pressure from them decreases, helping to reduce and avoid a potential downside spiral. Therefore, for the market to avoid a long squeeze, BTC must reclaim $95k and attempt $96k.
