The price of Bitcoin surpassed an all-time high on Christmas Day, reaching $24,681 on Binance. After BTC’s strong rebound, traders and analysts are exploring short-term short and long cases.
The market sentiment surrounding Bitcoin is still overwhelming, but in the foreseeable future, analysts have raised some concerns, so the next move is not a clear choice.
Bitcoin futures financing rate
Bitcoin (BTC) has risen above US$24,600, and short compression is relatively small. In the past four hours, only US$95 million worth of short contracts have been liquidated, indicating that this rebound was not triggered by a brief tightening. When many short contracts or sell orders are cleared in the futures market, a short squeeze occurs. This happens when the sell order is over-leveraged, which means that the trader is actively selling bitcoin with the borrowed capital.
Since the rally was not triggered by a brief contraction, the futures market has been dominated by buyers and long contract holders. This trend has led to a 0.1
The average funding rate for Bitcoin futures contracts on most exchanges is 0.01%. When the financing rate is 0.01%, traders must pay 0.01% of their positions as a reward to the shorts, who are a minority in the market. However, when the financing rate increases and traders who are buying Bitcoin must pay huge financing fees, the attractiveness of buying long-term Bitcoin will diminish.
Currently, as of December 25, the funding rate of Bitcoin futures is hovering at 0.1%. Therefore, traders and strategists stated that Bitcoin is at risk of a correction because, at least in the short term, its attractiveness to long-term BTC weakens. Mohit Sorout, the founding partner of Bitazu Capital, pointed out that Bitcoin’s funding rate is extremely high, which indicates that a correction is possible.
Edward Morra, a cryptocurrency derivatives trader, expressed similar views. He added that many traders in the futures market began to crave or buy Bitcoin after Bitcoin reached around $24,400. After the decline, he expects that the financing rate will be reset after local corrections. Morra tweeted: “Derivatives traders are not buying on dips, but are bullish on Omega again above the classics. Now spot Chad will flush them, send premiums and funds to the benchmark, and proceed Continue after partial correction.”
However, some traders disagree that during a strong bull market, futures financing rates are crucial. Salsa Tekila, an anonymous Bitcoin trader, pointed out that in the 2017 bull market, BTC’s financing rate was as high as 0.375%. Considering that the price is much higher, but it can be said that it is in the early stage of the rise, the trader said that the funding rate alone may not be able to accurately predict the rise:
“During the period when prices are spotting a bull trend, it is very stupid for me to rely solely on funds to reduce ATH and hope to get the top position in Wyckoff. In the bull trend of 2017, the funds for several weeks were 0.375 (the largest).
Considering Bitcoin’s previous historical price cycles, traders are more cautious about short-term peak forecasts. This has led to bull market cases in BTC in the foreseeable future, revolving around the theory that historical trends during the bull market may not repeat itself.
Bitcoin’s bull market in the short term
Bitcoin’s short-term bull market case is based on two main factors: institutional accumulation and the circulation of altcoin profits into Bitcoin. As traffic into Grayscale continues to increase and altcoins lag behind BTC, these two trends continue.
Ki Young Ju, CEO of CryptoQuant, stated that he hopes that Bitcoin will correct when institutional purchases slow down. However, before this happens, Ju said he will maintain his bullish bias: “When institutional buying stops, prices may fall sharply.” This can be seen by evaluating Grayscale’s assets under management and CME futures data. . The new ATH will be determined by institutional investors when they stop buying BTC. Until then, I will maintain my bullish bias. “
According to Grayscale, the company’s total assets under management hover at $16.3 billion, of which over $14 billion comes from Grayscale Bitcoin Trust (GBTC). GBTC’s AUM is considered to be an indicator of institutional sentiment surrounding BTC, as it is usually the first entry point for institutions to enter the Bitcoin market, especially in the United States.
The strong institutional accumulation of Bitcoin and the lack of liquidity in the altcoin market have jointly promoted the short-term bull market of Bitcoin. Santiment, an on-chain market analysis company, tweeted: “As the end of the year approaches, the liquidity of most #crypto assets other than BTC and ETH is rapidly declining.” This shows that most of the interest in encryption is still concentrated in Bitcoin.
According to the trading heat map of Material Indicators, the next major resistance levels for Bitcoin are at $25,000 and $30,000. Stacked sell orders above two levels, once these resistance areas are reached, may cause a temporary pullback. Prior to this, the sentiment surrounding Bitcoin remained strong due to high institutional demand and the lagging altcoin market.