07 Jun 2023

Shorts already squeezed - what's next?

In yesterday's Ahead of the Curve, We argued that the market overreacted to the Binance news. We're now firmly back to where we started the week, structurally and technically.
Source: Laevitas


  • OI reversion
  • Feb high support
In yesterday's market update, we argued that a short squeeze was near. The squeeze happened in the evening. Let's drill into the current market state.Snippets from Tuesday's market report
Despite being in the spotlight yesterday, Binance activity was the key contributor to the surging open interest, seeing a daily growth of 8.3%. The growth was accompanied by funding rates melting down toward March lows, an indication that a bearish bias may be an overcrowded consensus trade for the short term."
Bitcoin is classified as a commodity. Americans can purchase BTC through a plethora of exchanges, exchange-traded funds, payment apps, and more. Binance.US is not a significant loss. Liquidity could consolidate further towards Coinbase and Kraken, but the market should not crash 5% on these developments.
BTCUSDT funding reached March lows on Monday but recovered to neutral levels as BTC recovered.
Funding rates
Source: Tradingview (Coinbase), Binance
OI surged to 314k BTC on Monday and got squeezed back to 290k.
OI changes
Source: Laevitas
For now, perps no longer seem squeezable, neither to the upside nor downside.
CME Bitcoin Futures
Non-ETF dominance on CME surged to 44% on Monday as OI grew by 13.3% amidst surging volumes and plunging basis. OI fell by 5.5% yesterday, 7% higher than the Friday close.
Source: CME Group, ProShares, Valkyrie, VanEck, Bitwise
CME's 1mth basis recovered at 8%, higher than the weekly open (3%). The higher open interest, and growing basis is a positive development from the institutional side of the market.
Source: Tradingview
The range
BTC found support at Feb highs, and for now, I expect the 3mth trading range to hold firm and the chop to ensue.
Summers are slow, few catalysts are ahead. BTC volatility of late largely stems from activity from within with minimal external capital rotation.
Source: Tradingview, K33 Research
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