The Bitcoin futures market turns bearish: Will BTC fall to $112K?
Since reaching $124k, Bitcoin [BTC] has declined for five consecutive days, hitting a local low of $114,442. In fact, at the time of publication, Bitcoin was trading at $115,055, marking a 3.24% drop over the past week.
Amid this sharp decline, futures are slowly turning bearish, which may not be good for BTC. Here’s why.
According to crypto analyst Axel Adler, the Bitcoin sentiment index in the futures market has decreased to 36%. With this drop, the index is now significantly below the neutral zone or bearish territory.
Generally, a drop in this index falling below 45 suggests that most traders are becoming more risk-averse and expect lower prices. Therefore, futures are experiencing fear-driven activity that could further drive down the downside.
Historically, futures sentiment has played an important role in Bitcoin's price movement. For example, from August 11 to 14, when the sentiment index rose to 70%, the price of Bitcoin increased to $123k.
Therefore, the recent drop implies that rebounds will be unloaded, resulting in price fluctuations. In these circumstances, Adler suggests that Bitcoin will face downside risk, potentially falling to $112k.
Retailers are driving bravery
Ambcrypto's look at the futures market showed that retail traders dominated and appear extremely bearish.
To begin with, the average order size data from Cryptoquant showed massive retail orders.
These small-scale participants primarily short the market. According to Coinglass, the long-short ratio of Bitcoin decreased to 0.8765, with shorts representing 53%.
At the same time, long positions accounted for 46.7% of total futures contracts. Often, when shorts dominate, it indicates that most participants are betting on prices declining, a clear bearish sign.
Selling activity is also intensifying
As retail traders in the futures market are bearish, they are aggressively unloading their holdings in the spot market.
Generally, when momentum indicators fall to such levels, it indicates strong downward momentum and the potential for trend continuation.
That said, if retail continues to sell and act the market, BTC could test the support of $112k, as predicted by Adler.
However, if many of them place bearish bets, we could see a rebound driven by a short squeeze with BTC reclaiming $117k.
