- BTC has seen a large number of short trader liquidations over the past month, and thus the price has gone up.
- As buying pressure subsides, BTC price may face a correction soon.
In January 2023, Bitcoin [BTC] The markets experienced their strongest monthly performance since October 2021, with a year-over-year (YTD) increase of more than 43%. Glassnode, on file a reportIt found that this unexpected increase in value put the BTC price at its highest level since August 2022, with a weekly gain of 6.6% from the low of $22,400.
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Glassnode reports that the increase in the number of short squeezes in the derivatives market was the main reason behind the recent rally in the BTC price over the past month. The recent rally was driven by short pressures in the derivatives market, with more than $495 million of short futures contracts being liquidated in three waves.
The report indicated that the cash and mobile basis of perpetual swaps and calendar futures contracts are now in the positive territory, indicating a return of positive sentiment and speculation in the market.
Although total open interest in BTC, relative to its market capitalization, has declined since November 2022, and the leverage ratio has dropped from 40% to 25%, Glassnode thought this represented a decrease in futures leverage and short-term speculative interest.
Moreover, Glassnode found that as the price has increased over the past month, so has new demand for the king coin. According to the report, the total balance of BTC held on exchanges has reached a multi-year low of 11.7% of the circulating supply.
The daily inflow and outflow of coins from the exchanges was balanced, with a net inflow of $20 million, reflecting a slowdown in new demand. The largest monthly coin inflow in history occurred from November to December 2022 but has returned to neutral, indicating slowing outflows.
BTC’s bullish trend may stop
The movements of BTC on the daily chart indicate that its price might face a downside in the new trading month. At the time of writing, the moving average convergence/divergence (MACD) of the leading currency has revealed that a new bearish cycle has begun. The MACD line crossed the trend line in a downtrend, and the BTC price fell to its January 21st level.
Additionally, the coin’s price and Chaikin Money Flow have been moving in opposite directions over the past two weeks, resulting in a bearish divergence.
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This bearish divergence indicates that there could be a potential price drop in February, as the trend in CMF indicates less buying pressure while the price continues to rise. This is a red flag for investors, as it could indicate that an upward trend in price is not supported by underlying demand.
Finally, BTC’s Money Flow Index (MFI) was at 48.46 and was in a downtrend at the time of publication, having breached the neutral point of 50. This also showed that the buying momentum has significantly decreased in the Bitcoin markets.