Bitcoin’s short squeeze may lead to a rally after Christmas

Bitcoin (CRYPTO:BTC) has experienced a significant 4.16% surge in the past 24 hours, trading at $98,056, signaling a potential rally post-Christmas.

This recent price uptick from a low of $93,461 to a high of $99,419 has sparked discussions among analysts about BTC’s future performance in the wake of the holiday season.

According to Cryptoquant analyst Traders Oasis, Bitcoin is expected to experience sideways movement during the Christmas week, followed by a possible distribution phase as demand for short positions increases.

Despite a recent correction, attributed to a lack of institutional demand, the analyst suggests that the market could continue to rise, as the Coinbase premium index has entered negative territory, signaling potential upward momentum.

A critical factor supporting this rise is the decline in Bitcoin’s funding rate, a positive sign for a bull market, coupled with a surge in open interest.

This combination indicates that more investors are opening short trades, betting on Bitcoin’s price drop.

However, this increased demand for short trades could lead to a short squeeze, as rising buying pressure causes prices to spike, resulting in a self-reinforcing rally.

Over the past three days, the BTC fund flow ratio has surged from 0.084 to 0.137, suggesting that more capital is being invested into Bitcoin.

This inflow is accompanied by a reduction in BTC held on exchanges, creating a scarcity effect that could drive prices even higher.

The rising stock-to-flow ratio also reflects this growing scarcity.

With increasing demand and limited supply, Bitcoin could break through the $100,000 resistance level if the current trend continues.

However, if the market remains stagnant, BTC could drop to around $96,600.

At the time of reporting, the Bitcoin price was $98,234.72.