Bitcoin [BTC] has seen a slight uptick in the last 24 hours as the holiday spirit sets in across the markets. At the time of writing, Bitcoin was valued at $98,056, reflecting a 4.16% increase in the past day.
On Christmas Eve, Bitcoin witnessed a rally from a low of $93,461 to a high of $99,419. This recent surge has left experts speculating on Bitcoin’s performance post-Christmas.
One analyst, Traders Oasis from Cryptoquant, has suggested that Bitcoin might see a period of consolidation during the Christmas week, followed by possible distribution movements as there is growing interest in short positions.
Rising Interest in Short Positions for Bitcoin
As per Trader Oasis, Bitcoin has been undergoing a corrective phase in the recent weeks due to a lack of institutional demand.
His analysis indicates that the Coinbase premium index did not align with the price surge, resulting in a pullback. Nonetheless, the analyst anticipates further upward movement in the market as the index has turned negative.
He points out that the ongoing potential uptrend is supported by funding rates and open interest in the market.
The declining funding rate is viewed positively for a bullish market outlook, while the surge in open interest over the past few days is noteworthy.
When the funding rate drops alongside an increase in open interest, it signals that investors are opening short positions. This suggests their anticipation of price declines.
Nevertheless, the heightened interest in short positions could trigger a short squeeze with rising buying pressure. This surge attracts more buyers, thus fostering a self-reinforcing uptrend.
Bitcoin has witnessed a surge in demand over the last three days. During this period, the BTC fund flow ratio rose from 0.084 to 0.137.
An increase in the fund flow ratio signifies a higher influx of capital into Bitcoin. Such a trend is bullish, indicating investors are ready to commit more funds to BTC, leading to price appreciation due to increased buying pressure.
Moreover, the escalating inflow implies more Bitcoin is being withdrawn from exchanges, heightening scarcity. With greater trader interest in purchasing the crypto, its scarcity is rising, as shown by an increasing stock-to-flow ratio.
As Bitcoin becomes scarcer, its value tends to surge as heightened demand coupled with limited supply results in price spikes.
What Lies Ahead for Bitcoin?
With a growing appetite among investors for short positions, these traders might face the risk of a short squeeze. In such a scenario, increased demand from short sellers can trigger a market reaction driving prices upwards.
Hence, if the demand persists while the supply shrinks, Bitcoin could potentially surpass the $100,000 resistance level post-Christmas. However, if the cryptocurrency continues to trade sideways, it could retreat towards $96,600.