Bitcoin bears could be facing trouble as a recent analysis shows that open interest on the shorts’ side is slowly increasing, aligning with the spot buying volume. This situation often leads to short squeezes, potentially pushing the price of Bitcoin towards $100,000. One key indicator to watch is the Spot Cumulative Volume Delta (CVD). This metric reflects the total net buying or selling on the spot market, and currently, there is a noticeable uptick in spot buy delta. The Spot CVD is leading the price action, indicating that the recent uptrend in Bitcoin is mainly driven by spot market activity.
While spot market participants are showing increased buying interest, the narrative is different in the futures market. Traders in perpetual contracts seem to be leaning towards pessimism, with the Perp CVD dropping more rapidly than the price. Additionally, there is a surge in perp selling, suggesting that the futures market sentiment is bearish. Despite the optimistic buying pressure in the spot market, futures traders are more inclined to sell, creating a divergence between the two markets.
For spot traders looking to buy or hold Bitcoin, the rising Spot CVD coupled with price action is a positive sign, indicating strong buying momentum. On the other hand, futures traders need to exercise caution as the declining Perp CVD signals bearish sentiment in the futures market. The prevailing trend of selling in futures contracts may lead to price adjustments and higher volatility, pointing to a potential shift in market dynamics.
The current dynamics in the Bitcoin market suggest a tug of war between spot buyers and futures sellers. While spot market activity is driving the recent price surge, futures players remain cautious, potentially leading to increased market volatility. Traders should closely monitor these diverging trends to make informed decisions in this evolving market environment.