Bitcoin Surges to $103K as Funding Rate Becomes Positive After Liquidations

Bitcoin has returned to the $100,000 level for the first time in several months, with a nearly 5% increase over the past week. Currently, BTC is priced at $102,922, reflecting a daily rise of 3.5% and approaching its all-time peak of $109,000 from January.

This recent movement above the significant psychological barrier signals a renewed phase of bullish market activity, coming after an extended period of trading between $93,000 and $98,000.

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Clusters of Short Liquidation Trigger Rally

Insights from a contributor indicate that the recent surge in prices has been fueled partly by a series of short liquidation events on a prominent exchange.

These liquidations alleviated some downward pressure from the market and transformed the funding environment for derivatives, suggesting a shift in trader sentiment. It was highlighted that a large accumulation of short positions had developed recently, setting the stage for a squeeze.

It was noted that a primary liquidation took place at the $97,000 mark, resulting in the elimination of numerous short bets, amounting to about $360 million.

Traders had anticipated a local peak; however, BTC broke through this area, triggering a barrage of short-covering and forced liquidations, leading to a swift price increase as sellers rushed to close their positions.

After this rapid climb, the price stabilized below $101,000, where another significant cluster of short interests had formed. This set the stage for a secondary wave of liquidations.

Upon surpassing $101,000, approximately $240 million in shorts were liquidated, aiding the breakout that pushed prices toward $104,000. Data from liquidation heatmaps pointed out both the $97,000 and $101,000 levels as significant points of high liquidity, further supporting the idea that these were planned liquidation sweeps.

Shift in Bitcoin Funding Rate Indicates Bullish Outlook

The repercussions of these liquidations went beyond just spot price fluctuations. The funding rate chart indicated that before the liquidation events, the rate was negative, reflecting the bearish sentiment among traders maintaining short positions.

After the two waves of liquidations, the funding rate shifted to +0.01%, signaling an increasing demand for long positions.

This transition from a negative to a positive funding rate is commonly viewed as a structural shift in the market sentiment, indicating a movement from bearish to bullish expectations. This implies that many traders foresee further upward movement, at least in the short term.

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Moreover, the swift change in funding rates highlights the influence that derivative market positioning can exert on spot price movements, particularly during times of lower liquidity or heightened leverage.

Featured image created with DALL-E, chart from TradingView.