Bitcoin (BTC) recently surged past $95,000, sparking heightened investor optimism and a surge in demand for long positions.
Funding rates turned positive, with over 90% of positions being long, reflecting bullish sentiment.
Open Interest increased by $1 billion in 24 hours, signaling more traders entering the market with long positions.
Despite these metrics, Bitcoin’s price has stagnated around $94,000 for the past two days.
Spot Cumulative Volume Delta (CVD) remains negative, indicating weakening buyer strength despite rising Open Interest.
A potential long squeeze looms as speculative investors dominate the market, creating risks of a sharp price drop below $90,000.
Short-term holders (STH) are showing signs of profitability, which could stabilize the market and prevent a long squeeze.
Bitcoin’s Meteoric Rise and Investor Optimism
Bitcoin’s recent rally past $95,000 has reignited investor enthusiasm, with many anticipating further gains. This price surge has led to a significant increase in demand for long positions, as traders bet on the continuation of the uptrend. Over the past week, the market has been characterized by heightened optimism, with funding rates turning positive and long positions dominating the trading landscape.
In the last 24 hours alone, Bitcoin’s funding rate has surged, with over 90% of positions being long. This indicates that the majority of market participants are betting on Bitcoin reaching the coveted $100,000 mark. However, this overwhelming bullish sentiment could pose risks, especially if price momentum begins to falter.
Rising Open Interest and Stagnant Price Action
One of the most notable developments in the market has been the sharp increase in Bitcoin’s Open Interest. Within a single day, Open Interest rose by $1 billion, climbing from $31 billion to $32 billion. This surge reflects a growing number of traders entering the market to open new positions, predominantly long ones. Historically, rising Open Interest often signals increased market activity and optimism.
However, despite this uptick in Open Interest, Bitcoin’s price has remained stagnant around the $94,000 range for the past two days. This lack of upward momentum, despite bullish metrics, raises concerns about the sustainability of the current rally. It suggests that while traders are optimistic, the underlying buying pressure may not be strong enough to push prices higher.
Weakening Buyer Strength and the Risk of a Long Squeeze
Another critical metric to consider is Bitcoin’s Spot Cumulative Volume Delta (CVD), which has remained firmly in negative territory. At the time of writing, the Spot CVD stands at -1094, indicating that buyers are losing strength even as Open Interest continues to rise. This divergence between CVD and Open Interest suggests that speculative traders are dominating the market, while genuine buying demand is waning.
When buying pressure weakens in a market dominated by long positions, the risk of a long squeeze increases. A long squeeze occurs when prices drop sharply, forcing traders with long positions to liquidate, which further accelerates the price decline. Current market conditions, characterized by high optimism and weakening buyer strength, create a perfect setup for such an event. If a long squeeze materializes, Bitcoin could see a sharp drop below $90,000, where long positions are heavily concentrated.
The Role of Short-Term Holders in Market Stability
Amidst the looming risks, there is a glimmer of hope from short-term holders (STH). The short-term holder realized profit/loss ratio recently climbed to +1.2%, marking a significant psychological shift. Historically, when this ratio turns positive, it has often signaled the beginning of a sustained recovery in Bitcoin’s price.
Short-term holders in profit tend to reduce selling pressure, which can help stabilize the market. Their profitability brings a sense of positivity and confidence, potentially offsetting the bearish sentiment caused by weakening buyer strength. For Bitcoin to avoid a long squeeze, it is crucial for the price to reclaim $95,000 and make a push toward $96,000. This would reinforce market confidence and reduce the likelihood of a sharp downturn.
Conclusion
Bitcoin’s recent rally past $95,000 has sparked optimism among investors, but the market’s underlying dynamics reveal potential risks. While funding rates and Open Interest point to bullish sentiment, the stagnation in price and weakening buyer strength raise concerns about the sustainability of the uptrend. The negative Spot CVD and the dominance of speculative long positions create a precarious situation, increasing the risk of a long squeeze.
However, the profitability of short-term holders offers a silver lining. Their reduced selling pressure could help stabilize the market and prevent a sharp decline. To maintain upward momentum and avoid a long squeeze, Bitcoin must reclaim $95,000 and aim for higher levels. The coming days will be critical in determining whether the market can sustain its bullish trajectory or succumb to bearish pressures.
