Post mortem: Why did Bitcoin pump over the weekend?

Delving into the heart of the action reveals a fascinating interplay of open interest, funding rates, and a swift wipeout of shorts. 

TLDR

• Bitcoin saw an unexpected surge over the weekend, jumping from $27,100 to $28,300.
• Shorts are being mauled as significant amounts of Open Interest are amassed and then wiped out
• Altcoins also gained ground, showing relative stability compared to Bitcoin's volatile movement.
• Caution is advised, as the rally's momentum appears driven by perp trading rather than organic spot orders, raising questions about its sustainability.

Disclaimer: Not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results. “One Glance” by Cryptonary sometimes uses the R:R trading tool to help you quickly understand our analysis. They are not signals, and they are not financial advice. Any capital-related decision you make is your responsibility and yours only.

Bitcoin's weekend rally

Over the past few days, we have had some relatively major breakouts from BTC and Alts across the board. 

The main driver of this was when BTC  sat at $27,100, and the open interest increased by approximately $350 million. The increase in open interest sent the funding rate into negative territory. 

This move indicated that shorts were beginning to build up. And when the volumes were lighter over the weekend, a large Spot buyer came in with a sizable market order and drove up through the orderbook. As a result, the $350 million of Open Interest that had been built up before this was wiped out. Many of the shorts were liquidated, and Open Interest was reset. 

A lot of Alts also moved meaningfully higher from this BTC move. However, unlike Bitcoin, they didn't have as many leverage shorts that needed unwinding. So, they strangely look somewhat healthier than BTC.

Both BTC and ETH have now moved into major horizontal resistances at $28,300 and $1,745 respectively. Additionally, Open Interest has increased again by approximately 10% (similar to the sizing wiped out just 24 hours ago), and funding is negative for BTC again. So, we may get another short-squeeze, and BTC can lead the market higher again.

How should you respond to the market?

We do, however, still feel that entering the market here is not the correct thing to do. We sense there is still some underlying weakness and much of the moves up have been driven by perps rather than Spot orders. 

What we are seeing is shorts being mauled as significant amounts of Open Interest are amassed and then wiped out. This is usually an unhealthy sign. Personally, we are remaining on the sidelines and not looking to FOMO into anything here. 

Data to watch this week

Many of you may now know that when it comes to the macro, one of the main things to keep a close eye on is the labour market and the data surrounding it. 

This week, we have:

• Tuesday - JOLTs
• Friday - Unemployment Rate
• Friday - Non-Farm Payrolls

The JOLT's data is the number of open jobs from employers. Over the last 9 months, this has been downtrending. The decline highlights employers becoming more cautious about taking on more labour. The estimated number is 8.6 million. This would be a decrease of approximately 200k on the prior month. 

Friday is arguably the bigger day. The unemployment rate is expected to come in the same as last month at 3.8%, whilst nonfarm payrolls are expected to come in at 150k, again showing a real decrease in the number of jobs added in the U.S. month-by-month. 

Cryptonary’s take

Here’s how to respond to the data.

If the labour data comes in weak, the Fed may actually welcome this. Remember, the Fed must squash demand to get inflation down to the 2.0% mandate. Markets may take this as good or bad; it's hard to say. But, we think they will take it as fine for now unless it's a real downside surprise and there's material weakening. 

If the data comes in far hotter (better/healthier) than expected, we think markets can come down slightly. They know that the Fed does not want this, and a labour market that is too resilient will need the Fed to be more aggressive and hawkish, which, in turn, is not positive for markets. 

The analysis of what’s coming this week and today's Watchlist should set us up nicely for the week ahead regarding being prepared for what the markets may throw at us. 

Let's see how we go.

As always, thanks for reading. 

Cryptonary out!