Bitcoin Strengthens Amid Improved Market Sentiment

Bitcoin gained 6% in the past 24 hours, although trading volume remained low. Bitcoin rallied above $43,000 on Monday, retracing about 30% of the sell-off since November. It is expected the short squeeze rally could continue, with less momentum compared with previous price surges.

Trading volume across major Bitcoin exchanges ticked higher on Monday, but is still lower than January highs. Below-average trading activity during price rallies typically reflects low conviction among traders.

Volatility is also low in the bitcoin options market despite the price rally. Volatilities remain under tremendous pressure in spite of the fast rally in the Bitcoin spot market.

For now, technical indicators show additional room toward resistance at $45,000-$47,000. Bitcoin is testing its 50-day moving average after an oversold bounce left support intact around $37,400.

Bitcoin’s average funding rate, or the cost of holding long positions in the perpetual futures market listed on major exchanges, also remains low despite the recent price rally. That could mean leveraged traders are still cautious and have not positioned themselves aggressively during Bitcoin’s 13% price jump over the past week.

The previous surge in bitcoin funding rates occurred early in 2021, which preceded a near-50% selloff. This time, however, funding rates have not reached extreme levels, which suggests some traders have been on the sidelines, scarred by significant liquidations in the prior selloff.