Bitcoin Funding Rate Turns Positive Amid Long Position Dominance, Potential Long Squeeze Looms

Bitcoin’s funding rate recently turned positive, signaling a surge in long positions among traders, particularly above the $90k mark.

• Bitcoin registered a hike in long positions above $90k.

• The cryptocurrency may encounter a long squeeze as demand surges, while price momentum weakens on the charts.

Over the past week, the market saw Bitcoin [BTC] rally past $95k, resulting in increased investor appetite for further gains. As a consequence, the demand for long positions has skyrocketed. In fact, within the last 24 hours, Bitcoin’s funding rate turned positive again, with longs being dominant above $90k.

Source: Alphractal

This indicates that most investors expect the uptrend to continue, potentially reaching the $100k mark. However, the surge in demand for longs could become problematic as price momentum appears to weaken.

The uptick is also reflected in Bitcoin’s open interest, which increased by $1 billion in just 24 hours, rising from $31 billion to $32 billion. Generally, when open interest rises, it suggests more traders are entering the market to open new positions, particularly long positions.

While both open interest and funding rates have increased, Bitcoin’s price has remained stagnant around the $94k range for the past two days.

Source: CryptoQuant

Furthermore, 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.

Source: Checkonchain

Given the current market dynamics, a risk of a long squeeze appears imminent. According to Alphractal, 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.

Is a long squeeze inevitable for BTC?

The rising funding rate combined with weakening buying momentum is indeed a cause for concern. If this trend continues, it could facilitate a long squeeze that drives prices below $90k.

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.

Source: CryptoQuant

Importantly, 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.

Conclusion

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.