Bitcoin: Spot Volume Not Derivatives Is Responsible for BTC’s Hike
James Van Straten, a data analyst, posted that Bitcoin’s (BTC) price increase was because Open Interest had decreased and spot accumulation had been increasing. To arrive at this inference, Van Straten compared Bitcoin’s Open Interest around October to the state of the indicator on December 8.
Another reason why this #Bitcoin rally has legs is open interest has continued to drop for the past 7 days. Sign of spot accumulation.
Similar levels of OI as October when the price was $26,000. https://t.co/YMsL7HrAQ4 pic.twitter.com/mrTzfVaUX6
— James Van Straten (@jimmyvs24) December 8, 2023
Uptrend Becomes Weak
According to Coin Edition’s observation, the drop in Open Interest and rise in spot accumulation was one of the reasons Bitcoin rose above $33,000 around that time. Now, this decrease in Open Interest suggests that traders are closing contracts linked to BTC.
When compared to the price increase above $44,000, this is supposed to weaken the uptrend. However, that might be unlikely because of the increase in buying activity on the spot market.
Previously, on December 6, Van Straten also mentioned that whales holding around 10,000 BTC have been increasing their size in the asset. This happened when Bitcoin’s price was lurking around $38,000.
Therefore, it is likely that the accumulation also influenced the jump to $44,000. So, irrespective of the lack of interest in the derivatives market, BTC’s price might increase as long as spot buying remains present.
Volatility Drops But BTC Is Not Done
From a technical perspective, the volatility around Bitcoin has been dropping. At press time, the Bollinger Bands (BB) had contracted, suggesting that BTC’s price fluctuation might be minimal in the short term.
Therefore, the coin may keep trading between $43,172 and $44,123. Also, the upper band of the BB touched Bitcoin at $44,269 on December 8. This indicates that it was overbought. So, the coin value may drop below $44,000 unless the accumulation strengthens.
Furthermore, the Money Flow Index (MFI) dropped to 62.45. This reading means that the previous buying pressure had subsided. Should the MFI reading drop below 50.00, then BTC may change hands below $44,000.
However, this potential decrease may provide another buying opportunity for market participants. At the same time, there is a likelihood for Bitcoin’s price to increase soon after the possible reversal.
For traders, a retracement is not enough ground to go back on the bullish bias. This assertion was taken from the funding rate. At the time of writing, BTC’s funding rate was 0.035%. The reading of this metric implies that traders have more long positions than short in the derivatives market.
Additionally, a close look at the positions showed that traders expect BTC to hit $45,000 anytime from now. Should the coin reach the price, then its chance of hitting $50,000 before 2023 ends may increase.
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