Bitcoin’s recent strong rise is attributed more to the liquidation of short positions in the futures market than to new capital inflows. Cryptocurrency trading firm QCP Capital warned that the Bitcoin rally could lose momentum if the buying pressure resulting from the closing of short positions decreases.
According to QCP Capital’s analysis, despite the rise in Bitcoin’s price, the amount of open interest in the futures market continues to decrease. This suggests that the price movement is being supported by the liquidation of leveraged short positions rather than the opening of new positions.
When investors who have opened short positions close them to limit their losses as the Bitcoin price rises, it creates additional buying pressure in the market. This process, called a “short squeeze,” can contribute to a faster price increase. However, as the number of short positions to be liquidated decreases, this supportive effect may disappear over time.
QCP Capital, however, noted that demand in the spot market is also starting to strengthen. The company stated that the recent sharp increase in capital inflows into Bitcoin ETFs indicates that investor interest is now being reflected in the spot market as well.
According to the company, the simultaneous liquidation of short positions in futures markets and the strengthening of spot demand stemming from ETFs could support the Bitcoin price in the short term. However, if the pressure to close short positions ends, there is a risk that the upward momentum will lose strength.
QCP Capital stated that the overall outlook for Bitcoin remains positive, but cautioned against buying driven by fear of missing out on a rally and those following momentum.
For market participants, both ETF inflows and the trend of open positions in the futures market will be critical indicators in understanding whether the rally is being supported by new capital in the coming period.
*This is not investment advice.
Continue Reading: Bitcoin Warning from Cryptocurrency Trading Company QCP Capital: “If This Happens, the Rally Will End!” Here Are the Details