Since September 5, many trades in the Bitcoin (BTC) futures market have apparently been clean. Since most of the bets were placed against BTC, BTC futures’ financing rate became negative.

But over the last 30 hours, the Bitcoin price of Coinbase has gone from $ 10,211 to $ 10,878. The high volume of market sales is causing Bitcoin to recover for three reasons.

These three factors are lower funding rates, the potential for short-term pressure and the effect of protecting the $ 10,000 support level.

Low funding levels benefit Bitcoin
In the Bitcoin futures market, there is a mechanism called “financing”. In short, financing provides incentives for traders who are hungry or betting on BTC to increase the price if the market is short, and vice versa.

Thus, when a large part of the market actively sells bitcoins at short notice, the holders of short contracts must compensate the owners of the long agreements. The problem arises when financing rates remain negative for a long time.

If BTC does not fall, but the funding rate remains low, there will be no incentive for cardholders to go short. Finally, sellers in short positions will adjust their positions, which requires them to buy bitcoins in the market. The whole process increases the demand for BTC in the short term.

A pseudonymous trader known as “Byzantine of the Year” pointed to low funding rates as a possible catalyst for BTC. To explain:

“We have about more people selling at a loss than selling at a profit. If you do not know, it’s optimistic. ”

Mohit Saruut, co-founder of Betazo Capital, similarly said that short positions led to an increase in long positions at Binance over the past 24 hours.

A short short squeeze occurs
As Cointelegraph previously reported, open interest in the futures market has been low over the past month. Consequently, there has been little volatility in the market for a long time.

The term “open interest rate” refers to the total amount of long and short contracts that are open in the market. It is an effective indicator of trading activity in the futures market at a particular time.

Since open interest was low, significant short-term stress was unlikely. Over the last two days, however, BTC has grown more than 6%, which has given a new strong impetus. The sudden rally indicates that there is currently a small short squeeze that will neutralize the futures market.

The power of the $ 10,000 level is significant
Traders often talked about the importance of the $ 10,000 support level in August and September.

Bitcoin has remained stable at $ 10,000 despite recent pressure from miners to sell, only to quickly get over this psychologically important level for traders. The long break in the CME release of $ 9,650 has increased the likelihood of a deeper dip below $ 10,000, although this is increasingly unlikely.

Stability above $ 10,000 and the ongoing attempt to test the resistance level of $ 11,000 is an optimistic trend.

Michael Van de Pope, a full-time trader on the Amsterdam Stock Exchange and a contributor to Cointelegraph Markets, explained that the critical resistance to a breakout is $ 10,700.

BTC crossed this resistance level on lower time frames, and the next hurdle for the high time frames is the $ 10,700 figure as the new support level. He said:

“In the resistance zone. The critical area to keep $ 10,350. Crucial resistance to $ 10,700 breakout. The eruption is also targeting $ 11,000-11200. “

Source: CoinTelegraph