Update on BTCUSD from 03.12.21. We started by taking a look with what was happening in sentiment land by comparing the ratio of Longs:Shorts over the last couple of days
So in summary
- We started by taking a look with what was happening in sentiment land by comparing the ratio of Longs:Shorts over the last couple of days (where we found that the ratio has been increasing = more longs than shorts)
- Then to figure out if this was new longs being opened or old shorts being closed we took a look at Open Interest (which we found to have decreased over the same period L/S increased = meaning positions have been net closing - aka shorts closing)
- To get another read of sentiment we looked at exchange funding rates (which are positive and relatively high - could also be due to shorts closing)
- Taking a look at the global leverage ratio (which has close been increasing over the same period L/S ratio has increased) indicates that traders have been entering with leverage instead of being spot driven (also helps explain the inflated funding rates)
- There has been a net inflow of BTC to exchanges over that same time period
Essentially it looks like shorts have been closing out which has exposed leverage longs (although shorts closing is good in terms of reducing resistance) it does create an imbalance in the market (specifically overleveraged longs) which creates incentive for MM to grab some liquidity - combine this with net BTC inflows over the past couple of days and it makes me believe something suspicious is brewing like a sweep of overleveraged longs.
But its also important to remember that MM will usually step into the market when you least expect it (along with the rest of retail)... they will wait until a little bit of fomo is generated (especially during tight consolidations) and then dump on the market... so now lets take a look at the charts and try to figure out how this might play out
More interestingly on the 4H:
We have also reclaimed the dynamic floor support but once again within one of these "volatility squeezes" which is a huge warning sign for me that something is brewing. As previously talked about until we get closure above the quarterly VWAP we are still under major resistance. I think after reclaiming the dynamic floor it is possible BTC pumps a bit to generate some good old fomo and inflate funding rates even more (more liquidity) - but ultimately my eyes are on the purple 200 EMA as the topside resistance of the volatility squeeze zone where a reversal is more likely to occur
https://www.tradingview.com/x/C5jkV5Wh/