It is believed that the recent sharp rise in Bitcoin is due more to the liquidation of short positions in the futures market than to an influx of new capital into the market. Cryptocurrency trading company QCP Capital has warned that if the buying pressure caused by short covering decreases, the Bitcoin rally may lose momentum.
According to QCP Capital's analysis, despite the rise in Bitcoin's price, the open interest volume in the futures market continues to decline. 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 Bitcoin's price rises, it creates additional buying pressure in the market. This process, known as a 'short squeeze,' can contribute to a faster rise in price. However, as the number of short positions subject to liquidation diminishes, this supportive effect may fade over time.
However, QCP Capital noted that demand in the spot market is also beginning 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 from ETFs could support Bitcoin's price in the short term. However, if the pressure to cover short positions weakens, there is a risk that the upward momentum will diminish.
QCP Capital stated that overall, Bitcoin's outlook remains positive, but cautioned against buying driven by fear of missing out (FOMO) and chasing the uptrend.
For market participants, both ETF inflows and the dynamics of open interest in the futures market will be critical indicators for understanding whether price gains are supported by the influx of new capital in the coming period.
*This is not investment advice.
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