The market is experiencing a significant Santa Claus rally, with Bitcoin maintaining a solid position above the $38,000 level. However, investors are expected to start selling their Bitcoin holdings once the price reaches a 19-month high. Bitcoin has since seen a notable sell-off from its recent high of $39,000, raising questions about its current state.
Short-term traders turn bearish
The price of Bitcoin has hit its highest level in 1.7 years, with the current price reaching $39,000. Open interest also reached $17.5 billion, the highest in 19 months. As BTC price rose from a low of $37.5K, more than $35M worth of positions were liquidated, with short positions reaching nearly $31M.
Nonetheless, when the price faced a rejection above $39,000, traders rushed to take profits, resulting in Bitcoin experiencing a liquidation of approximately $2.8 million. The outlook for options data remains bullish and the potential approval of a spot ETF is imminent, so this decline appears to be temporary volatility.
Data from the Deribit derivatives exchange shows an increase in call options compared to puts on Bitcoin, suggesting investors are hopeful of a price increase in early 2024. Deribit shows a declining put-call ratio, especially for expirations in March and June 2024, indicating a bullish market trend. .
Additionally, Netflow for Bitcoin continues to hover in negative territory, currently at -670 Bitcoin. This means that investors are now increasingly withdrawing BTC from exchanges, indicating a ‘hold’ sentiment.
However, the sentiment of short-term traders is currently turning bearish. According to Coin Glass data, the long/short ratio is falling below 1 to 0.7934. This means that about 56% of current positions are expecting the price to fall. Nonetheless, the bulls remain hopeful, holding a long 44% position against rising selling demand.
What’s next for BTC price?
Bitcoin broke the $38,000 resistance line and successfully achieved the $39,000 level. However, sellers quickly opened short positions near this level, resulting in a slight decline. At the time of writing, BTC price is trading at $38,777, up more than 2.7% from yesterday.
Repeatedly testing resistance levels often weakens them. If buyers can keep Bitcoin’s value above its recent breakout level, a surge to $40,000 is likely. However, this price could face notable challenges as sellers await a final move.
If sellers want to stop this upward trend, they will need to quickly push Bitcoin price below the 20-day EMA and the current uptrend line. This action could push the price off the firm support level of $34,900. A strong recovery at this point could keep the Bitcoin price within the $34,800-$38,000 range for additional time.
With moving averages rising and RSI trading just below overbought territory, Bitcoin now offers an advantage to spot buyers.