One Bitcoin trader explained 23 technical and fundamentally based reasons that BTC is entering a bullish phase.
A Bitcoin (BTC) trader under a pseudonym indicated 23 technical and fundamentally based factors that could drive BTC’s rise in the medium term.
Bitcoin price unshaken after US$ 150 million hack of KuCoin exchange
The data shared by the trader, known as „Byzantine General“, fits into four main themes. They are: a less overheated market, a futures market neutralizing itself, less leveraged traders and strengthened fundamentals.
The Bitcoin futures market is neutralizing itself
Since Bitcoin’s $10,300 recovery, a persistent narrative around the main cryptomeda has been its negative funding rates.
The Bitcoin futures market implements a mechanism called „financing“ to prevent the market from oscillating in a dominant way to one side. Thus, when the market is bullish, investors who bet on BTC’s bullishness compensate short sellers and vice versa.
Crypto hedge funds and mining regulations: the bad news crypto of the week
Over the past week, Bitcoin’s financing rate has remained negative or neutral, despite its declining price. This meant that short sellers continued to bet against BTC, but there were not enough long contracts to press.
The funding rates of Bitcoin
The low probability of prolonged pressure eventually led the market sentiment to change. The sale of Bitcoin quickly became an overcrowded trade, causing a small compression.
The trader emphasized that the consistently negative or basic funding rate is a positive factor for BTC. He explained:
„First of all, there is financing. One of the best indicators to evaluate market sentiment. After the 12k drop, it was consistently negative or baseline at best. Second, there is the contango index. This shows the difference between the price of SPOT exchanges and derivatives exchanges. When the SPOT has higher prices, the indicator goes down, to the green zone. A consistent premium for SPOT exchanges is considered optimistic. ”
For undecided traders like Byzantine General, who focus on long-term rather than short-term trading, changing market sentiment is critical.
The cryptomaniac market is less leveraged
Bitcoin initially rejected the $12,000 to $12,500 resistance range on August 17, and again on September 2.
Bitcoin’s two consecutive rejections in a crucial resistance area were brutal for futures traders. In the following two weeks, the number of open futures contracts decreased rapidly.
The term open contracts refers to the total sum of active contracts bought and sold in the futures market. In short, it shows the sum in dollars of the bets on BTC price movements.
The sharp drop in open futures positions means that fewer individuals have traded BTC with additional leverage. The major futures exchanges in the crypto market offer leverage of up to 125x. High leverage usually opens the possibility of large price swings.
The trader explained that a smaller amount of open contracts implies that there are now fewer leveraged positions in the market. For the BTC medium term trend, he argued that it is optimistic. He said:
„Is the market overly leveraged? The 12k range was absolutely brutal. We had several days of more than half a billion in liquidations. About one billion OI has been eliminated since the peak in the 12k range. ”