Could Bitcoin’s Post-Christmas Surge Be Triggered by Current Short Squeeze?

Key Points

• Bitcoin has seen a 4.16% increase over the past 24 hours, with high demand for short trades.
• Despite the increased demand for short trades, Bitcoin could potentially reclaim the $100k resistance post-Christmas.

Bitcoin [BTC] has experienced a slight increase in the past day, with a 4.16% surge. The cryptocurrency is currently trading at $98,056.

On Christmas Eve, Bitcoin’s value rose from $93,461 to $99,419, sparking discussions about the cryptocurrency’s performance after the holidays.

Bitcoin’s Demand for Short Positions Increases

Cryptoquant analyst Traders Oasis predicts that Bitcoin will move sideways during Christmas week, followed by a distribution movement due to rising demand for short positions.

Trader Oasis attributes the recent correction in Bitcoin’s value to a lack of institutional demand. He also noted that the Coinbase premium index, which did not accompany the price rise, led to a retrace.

However, he expects the market to continue rising as the index has entered negative territory. This potential rise is supported by declining funding rates and increasing open interest.

Implications of Rising Short Trade Demand

When the funding rate decreases while open interest increases, it suggests that investors are opening short trades, anticipating a drop in prices. However, a surge in short trades could lead to a short squeeze, resulting in a self-reinforcing rally due to increased buying pressure.

Over the past three days, the BTC fund flow ratio has increased from 0.084 to 0.137, indicating that more money is being invested into Bitcoin. This trend is a bullish signal, suggesting that investors are willing to allocate more capital to BTC, leading to rising prices due to increased buying pressure.

Increased inflow also means more BTC is moving off exchanges, thus raising scarcity. As more traders buy the cryptocurrency, it becomes scarcer, as indicated by a rising stock-to-flow ratio. This high demand coupled with low supply leads to higher prices.

What’s next for BTC?

With demand for short trades increasing, these traders could potentially experience a short squeeze, driving prices up. If the supply continues to fall while demand remains constant, Bitcoin could potentially reclaim the $100k resistance post-Christmas. Conversely, if the cryptocurrency continues to trade sideways, its value might drop to $96,600.