The Bitcoin price is already showing some signs of recovering after establishing support above $108,000 following the market flash crash. Over the weeks that followed, there have been some notable developments surrounding the largest cryptocurrency by market cap, suggesting that the price could be gearing up for another move-up. This is highlighted by crypto analyst Luca on the X (formerly Twitter) platform, showing some markers that point to a rise rather than a breakdown.
Bitcoin Indicators Point Toward An Increase
In the post, Luca outlines a number of factors that suggest that the Bitcoin price will likely continue to rise, coming down to the war between the bears and the bulls. Pointing out the decline that plagued the cryptocurrency at the start of the week, the analyst explained that crypto traders had initially thought that this was due to longs being flushed out from the market.
However, one thing stood out that suggests that this was not the case. Firstly, the funding rate had been on the decline, which usually happens when the long traders are being wiped out. But this has often come with a decline in the open interest at the same time, and this was not what happened.
During the market decline, the open interest had actually been on the rise. Coinglass data shows that while the Bitcoin open interest has since retraced from its $92 billion all-time high from earlier in the month of October, there was a notable spike at the beginning of the week.
Open interest had climbed from around $71 billion over the weekend to over $76 billion by Tuesday. Pointing this out, Luca explained that this only meant one thing: short traders were actually increasing their bets that the Bitcoin price would continue to fall.
Given this, the crash that the Bitcoin price had suffered at the start of the week looked to be a direct result of the shorts piling up rather than long traders getting washed out. It means the majority of traders are now betting that the price will continue to crash.
The interesting thing about developments such as these is that they are often precursors for the next upward move. The market rarely moves in the direction that the majority are expecting, as shown by the October 10 flash crash. Therefore, with more and more traders expecting the Bitcoin price to crash, it is likely that the price will move up instead.
“Historically, this kind of setup often fuels the next major move up, as excessive short exposure creates the perfect conditions for a short squeeze,” Luca explained in the post. With Bitcoin still trading relatively high, a short squeeze could provide the kind of momentum needed for the price to reach new all-time highs.
Featured image from Dall.E, chart from TradingView.com
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