Bitcoin price is already showing signs of recovery after establishing support above $108,000 after the market flash crash. Over the next few weeks, there have been some notable movements around the largest cryptocurrency by market capitalization, suggesting the price may be gearing up for further gains. This was highlighted by crypto analyst Luca on the X (formerly Twitter) platform, which shows several markers of an upswing rather than a collapse.
Bitcoin indicators suggest an increase
In his post, Luka outlined a number of factors that suggest the price of Bitcoin could continue to rise due to the war between bears and bulls. The analyst pointed to the decline that plagued cryptocurrencies earlier in the week, explaining that crypto traders initially believed this was due to longs exiting the market.
However, one point stood out that suggested this was not the case. First, funding rates were trending downward, which typically happens when long traders are wiped out. However, while this often coincided with a decrease in open interest, it did not happen this time.
While the market was declining, open interest was actually increasing. Bitcoin open interest has since retreated from its all-time high of $92 billion set in early October, although there was a notable spike earlier in the week, according to data from Coinglass.
Open interest increased from about $71 billion at the weekend to more than $76 billion by Tuesday. Pointing this out, Luka explained that this only means one thing: short traders are actually increasing their bets that the price of Bitcoin will continue to fall.
With this in mind, the crash suffered by Bitcoin prices earlier in the week appeared to be a direct result of shorts piling up, rather than long traders being wiped out. This means that the majority of traders are currently betting that prices will continue to fall.
The interesting thing about developments like this is that they are often a precursor to the next bull market. As the October 10th flash crash showed, markets rarely move in the direction most expect. Therefore, with more and more traders expecting Bitcoin prices to plummet, the price is likely to rise instead.
“Historically, this type of setup often facilitates the next big step up, as excessively short exposures create the perfect conditions for a short squeeze.” Luka explained in the post: With Bitcoin still trading relatively high, a short squeeze could provide the momentum the price needs to reach new all-time highs.
Featured image from Dall.E, chart from TradingView.com
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