Bullish momentum
Preview
17 Jan 2023
A hated rally
The current rally in Bitcoin has all the hallmarks of a "hated rally" with many sidelined investors who had been conditioned to short with conviction or rotate into fiat exposure in anticipation of further downside.
The current rally in Bitcoin has all the hallmarks of a "hated rally" with many sidelined investors who had been conditioned to short with conviction or rotate into fiat exposure in anticipation of further downside. This has caused a short squeeze and subsequent strength in BTC, resulting in a recovery to pre-November price levels and pushing the RSI to multi-year highs, a potent signal of changing momentum.Moreover, several noteworthy market tendencies have occurred over the last couple of weeks. The Grayscale discount has recovered from -48.5% to -36.3% year to date; bitcoin has experienced strength during Asian market hours; CME futures are trading above spot, and the term structure has normalized, while institutional participation in BTC futures is on the rise.
We anticipate that volatility will subside in the short-term, partly due to developments in Binance's BTCUSDT perp. Throughout the past week, open interest saw several sharp retracements coinciding with market strength as shorts covered. Additionally, as prices temporarily stabilized, open interest gradually grew as traders entered new shorts, expecting retracements in BTC. Nevertheless, the strength persisted, and shorts acted as a catalyst, further driving the prices up as shorts covered.
At present, shorts are not providing much of an impetus to push prices higher in the short term. Open interest has stabilized, with no notable growth after BTC recovered to above $20,000, indicating that short traders have learned from last week's unprofitable endeavors.
Source: Tradingview