- BTC is up 4.16% in the past 24 hours.
- Rising open interest and falling funding rates indicate high demand for Bitcoin short trading.
Over the past 24 hours, Bitcoin [BTC] saw small gains as markets got into the Christmas spirit. At the time of writing, Bitcoin was trading at $98,056. This represented an increase of 4.16% compared to the previous day.
On Christmas Eve, Bitcoin rose from a low of $93,461 to a high of $99,419. This uptick over the past day has led analysts to talk about BTC’s post-Christmas performance.
To this extent, Cryptoquant analyst Traders Oasis has suggested that BTC will move sideways during the Christmas week, followed by distribution movement as demand for short positions increases.
Bitcoin’s demand for short positions is skyrocketing
According to Traders oasisBitcoin has undergone a correction in recent weeks due to the lack of institutional demand.
Source: Cryptoquant
In his analysis, he stated that the Coinbase premium index did not accompany the price increase, leading to a backlash. However, the analyst expects the market to continue its rise as the index has entered negative territory.
Source: Cryptoquant
According to him, the continuation of the potential increase is supported by financing rates and open interest.
As such, funding rates have fallen, which is a positive sign for a bull market, while open rates have soared in recent days.
Source: Cryptoquant
When the financing rate falls while the open interest rises, it indicates that investors are opening short sales. As investors open short trades, this indicates that they expect prices to fall.
However, the increased demand for short sales could result in a short squeeze as buying pressure increases. This spike attracts more buyers, creating a self-reinforcing rally.
We can see this demand for Bitcoin in the last three days. During this period, the BTC fund flow ratio increased from 0.084 to 0.137.
Source: Cryptoquant
When the fund flow ratio increases, it means more money is invested in Bitcoin. Such a trend is a bullish signal indicating that investors are willing to allocate more capital to BTC. This leads to rising prices due to increased purchasing pressure.
Source: Cryptoquant
Furthermore, the increased inflow means that more BTC leaves the exchanges, increasing scarcity. As more and more traders buy cryptocurrency, it is now becoming scarce, as evidenced by the rising stock-to-flow ratio.
When Bitcoin becomes scarcer, prices rise because higher demand with low supply leads to higher prices.
Read Bitcoin’s [BTC] Price forecast 2024-25
What’s next for BTC?
As investor demand for short trades increases, it appears that these traders may experience a short squeeze. This is when the demand for those who are shorting causes the opposite reaction from the market, causing prices to rise.
Therefore, if demand remains constant while supply falls, as observed, we could see Bitcoin regain the $100,000 resistance after Christmas. However, if the crypto continues to trade sideways, it could drop to $96,600.