With BTC facing a significant drop in price, a majority of traders were betting on a downward movement with Bitcoin futures showing a 62.6% dominance in short positions.
However, the $97K-$99K support zone could keep Bitcoin’s price from falling further. Will the market see a short squeeze, or will the bearish trend continue?
According to Ali’s analysis on Coinglass, most traders were placing their bets on BTC losing value. On the same there were 62.6% of traders with a net futures short position, indicating bearishness.
Just 37.4% of traders were in long positions, suggesting players were bearish on the market continuing its downward grind.
Shorting Bitcoin implied that many traders expected downward pressure in the short term. This high short dominance indicated concerns that Bitcoin value could go down.
If Bitcoin’s price continued to drop, this could mean more market volatility, possibly more shorting.
On the flip side, an unexpected price rally could lead to a short squeeze. This would lead to increased prices as short sellers have to cover their position.
BTC’s Perpetual Contract Price at Negative Cost Basis
The basis for Bitcoin’s perpetual contract was negative at $28. Futures contracts trading at a lower price than the underlying cash price indicated bearish sentiment referred to as ‘negative price gap.’
The more net short on BTC than net long, suggested that the gap could be filled over further losses.
This could open arbitrage between the perpetual and spot prices. Traders could buy Bitcoin in the spot market and then be selling it in the perpetual futures market.
Although immediate price action was bearish, this was where the price gaps could be taken as a short-term, risk-managed trading opportunity.
This wide divergence between the two markets is likely to remain a torch that traders following Bitcoin volatility fix their attention on.
Bitcoin Miners Seize Rally to Sell
Price rallies also caused BTC miners to sell their holdings. The enormous spikes were seen in miner sell pressure during the price increase.
Miners have been following a strategy of ‘selling the highs, buying the dips’ to try and make the most profit when the market looks good.
Miners sold during price rallies suggesting they were taking this opportunity to liquidate some of their Bitcoin holdings.
According to the Alphractal data, miner sell pressure goes down during price dips because miners don’t feel like having to sell when prices are down.
Not only does the pattern showed that miners tend to sell high and hold when the market is down, but that the strategy is to minimize loss during downturns and maximize profits during uptrends.
Bitcoin’s $97K-$99K Range Forms Strong Support Zone
The $97k–$99k range was shaping up as the strongest support zone based on Bitcoin’s Cost Basis Distribution. This was where large portions of BTC’s supply were clustered, dropping with many investors buying there.
This price range was where the biggest concentration of Bitcoin holdings was, which means if prices drop, this will act as a very important support zone.
In case Bitcoin price finishes into this range, there is a probability of strong buying interest from the investors who got Bitcoin at this price.
The less selling pressure we shall get because the heatmap confirms these investors are probably going to hold their positions.
So the $97K to $99K vicinity is going to be a crucial support level for Bitcoin when it comes to preserving the stability of its price up.
