The latest Bitcoin rally is looking more and more like a move that was strongly fueled by short liquidations.
When the market is rising on genuine aggressive demand, you usually can clearly see an advantage of market buys. There wasnโt such a steady edge here.
17โ18 August the share of purchases was about 51โ54%.
August 19โ20 โ 53โ55%.
On August 21, volume grew to about $34.5 billion, but the share of buys was only around 51%.
After that, volumes began to compress quickly, and by the morning of August 27 the turnover was already far below the peak levels.
At the same time, open interest in futures during the price rise did not expand as much as we would have liked to see when new strong longs are added.
Thatโs why I wouldnโt rush to call all this a new full-fledged bullish impulse.
Part of the move could very well be just normal short-squeeze mechanics:
shorts are closed at a loss โ their buyback pushes the price higher โ the stops of the next group trigger โ the move continues.
The problem is that this kind of mechanism canโt work forever. Once the bulk of the shorts has been squeezed out, the market needs a new buyer.
And here there are still questions.
After the peak, volumes clearly dropped. Open interest does not show a strong inflow of new positions. Thereโs also no obvious advantage on aggressive buying.
For options, the situation is similar.
Thereโs still interest from above at $80โ82k and further at $90โ100k, but at the same time participants are actively hedging via options for a drop to $77k and $74k.
So the market still doesnโt look unambiguously bearish. I still allow for another push higher into the $80โ82k area, possibly a bit higher.
But if a real new demand doesnโt appear there, then itโs logical to expect a more normal correction.
The first zone from below is $77โ78k.
For me, the $72โ74k range is much more interesting next.
And this key area is $69โ71k.
Thatโs where Iโll be looking to see whether thereโs a real strong buyer.
If yes, then you can ะฒะฟะพะปะฝะต likely get another big upward move.
If not, then the whole story of the last upswing will start to look completely different.
Tomorrowโs options expiration may add additional volatility, but on its own it doesnโt solve anything.
The main question right now is very simple:
who will buy the next impulse if the shorts have already been largely burned out?