Bitcoin derivatives data suggests that BTC's recent rally was partially driven by leveraged speculation.
This is according to blockchain data analytics platform Glassnode in its report “A Breath of Fresh Air,” published on Tuesday, October 24.
In light of BTC's recent surge of over 20% in the past week, Glassnode analyzed Bitcoin derivatives data to determine whether the cryptocurrency's significant bullish momentum in the market was motivated by a leverage wash-out or a reduction in leverage, as the platform indicated.
Bitcoin hits new yearly highs of $35k
Recently, the price of Bitcoin hit new annual highs, of $35.133 dollars, driven by the expectations generated by the possible launch of a Bitcoin spot ETF in the United States and the future demand that this investment vehicle listed on the stock exchanges will generate for Bitcoin.
As noted by Glassnode, Bitcoin broke several key price barriers this week, showing a remarkable sign of strength in the market.
Bitcoin's bullish move pushed the cryptocurrency's price this week from a low of $27.100 to a high of $35.133 and, as analyzed by Glassnode, Derivatives markets contributed to BTC's recent surge with a pair of short squeezes, which forced short-sellers to close their positions to cover their losses.
Glassnode revealed that the Short investors have closed futures positions worth 60.000 BTC since the cryptocurrency's price surge began. Additionally, to date, approximately $56 million in short positions have been liquidated since October 17, when BTC's price surge began.
According to Glassnode, this is a significant short liquidation volume in the context of 2023, which is comparable to the short liquidation volume seen in January and the volume of long positions that were closed in August.
On the other hand, the platform highlighted that, although this week's short squeezes have boosted funding rates, they still remain low compared to those reflected in August, suggesting that Bitcoin's price rally "may only be partially driven by leveraged speculation," Glassnode indicated.
$4,3 billion added to Bitcoin buying open interest
As for Bitcoin open buying interest, Glassnode noted that this week this indicator increased by $4,3 billion, growing by 80% to reach more than $9,7 billion in total, currently.
Analysis by Glassnode also suggests that the degree of investor panic and fear in the current bear market has been much lower than that seen during the 2022 bear market, which has contributed to BTC’s recent surge.
It is "Another sign of investor resilience“Glassnode said.
The platform also addressed the sentiment of long-term Bitcoin investors, stating that this week, 4,7 million BTC, equivalent to 24% of the cryptocurrency's circulating supply on the market, went from being in the red to being in the green, totaling 81% of Bitcoin's circulating supply is now in profit.
Finally, Glassnode highlighted that long-term Bitcoin investors, also called HODLers, are a more robust and firm cohort compared to previous cycles. This week, the volume of bitcoins held in HODL, which reacted to the events of BTC's rise, remained at a minimum.
Continue reading: Bitcoin rise in 2023: three key factors to understand the trend
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