Bitcoin's Funding Rate Turns Positive as Long Positions Surge Above $90k

Bitcoin’s funding rate has recently turned positive, indicating a significant increase in long positions among traders, particularly above the $90k mark. This surge in long positions suggests that most investors anticipate the uptrend to continue, potentially reaching the $100k mark. However, the heightened demand for long positions could pose challenges as price momentum appears to be weakening.

The market has seen Bitcoin rally past $95k over the past week, leading to an increased appetite for further gains among investors. Consequently, the demand for long positions has surged, with Bitcoin’s funding rate turning positive within the last 24 hours, reflecting the dominance of longs above $90k. This shift indicates that traders are optimistic about the uptrend continuing, but the weakening price momentum could complicate this outlook.

The increase in demand for long positions is also evident in Bitcoin’s open interest, which rose by $1 billion in just 24 hours, from $31 billion to $32 billion. This rise in open interest suggests that more traders are entering the market to open new positions, particularly long positions. However, despite the increase in open interest and funding rates, Bitcoin’s price has remained stagnant around the $94k range for the past two days.

Bitcoin’s spot cumulative volume delta (CVD) has remained firmly in negative territory, recorded at -1094 at the time of writing. When the CVD declines while open interest rises, it indicates that buyers in the market are weakening, even as longs continue to increase. A decrease in buying pressure could lead to low demand, leaving room for speculative investors to exit the market to maximize profits. This dynamic increases the risk of a long squeeze, where a sharp drop in price could occur, potentially pushing Bitcoin’s price below the $90k level where longs currently dominate.

Given the current market conditions, the risk of a long squeeze appears imminent. Ongoing conditions may be positioning Bitcoin to experience such an event in the coming hours. Market anxiety could rise as many traders project higher prices, while bearish sentiment grows among those fearing a downturn. If this long squeeze materializes, it could lead to a sharp drop on Bitcoin’s price chart, potentially even below the $90k level where longs currently dominate.

However, there are signs of potential optimism among short-term holders. The short-term holder realized profit/loss ratio has climbed to +1.2%, indicating a key psychological shift. Historically, when this ratio turns positive, it signals the onset of a sustained recovery. An increase in profits for short-term holders can stabilize market sentiment and mitigate selling pressure. When this group sees profits, the tendency to sell decreases, thereby reducing the risk of a downward price spiral. Thus, for the market to avoid a long squeeze, BTC must reclaim the $95k level and aim for $96k.

As market conditions evolve, the bullish sentiment surrounding Bitcoin remains sensitive to external pressures. The potential for a long squeeze looms as demand for long positions escalates amidst weakening price momentum. Thus, maintaining vigilance in these turbulent times is essential for traders and investors.