The price of Bitcoin (BTC) rose slightly above $9,900 on BitMEX, rise by well-nigh 9% within less than 48 hours since May sixteen. Despite the impressive recovery, the top-ranked digital asset on CoinMarketCap faces the risk of a major long squeeze in the near term.

Iii factors that suggest the price of Bitcoin may correct following its contempo rally from $nine,100 to $9,900 are: the overwhelmingly large number of longs over shorts, rising funding and a possible triple lower high formation.

Bitcoin longs overwhelmingly trump shorts

Across Bitfinex, BitMEX and Binance Futures, 77.51% of traders are holding long positions on boilerplate.

In total, on the three futures exchanges lonely, there is $763 million worth of longs filed, whereas merely $221 million in shorts is present.

Total Bitcoin longs and shorts. Source: Blockchain Whispers

Total Bitcoin longs and shorts. Source: Blockchain Whispers

If the price of Bitcoin is going up without facing meaning resistance, a loftier number of long contracts can be considered an optimistic gene. It suggests the bulk of the market place is expecting the price of Bitcoin to increase in the short term.

For example, when the price of BTC rose from $8,500 to $x,085 within a four-day span in the commencement week of May, the market was majority long.

The difference between early May and the current cost trend is that almost lxxx% of traders in the entire Bitcoin futures market are long on BTC while information technology is testing the $9,900 to $10,000 resistance area that information technology has failed to overcome during the past 2 weeks.

Bitcoin funding, long to short contract ratio, and open interest. Source: CryptoISO

Bitcoin funding, long to short contract ratio and open interest. Source: CryptoISO

Ascension funding rate coincides with large long contracts

In the Bitcoin futures market, traders typically trade a perpetual contract that has no expiry date. Every bit opposed to conventional futures contracts, Bitcoin traders do not have to risk being forced out of their position due to time.

To provide some residue, futures exchanges use a machinery called funding. If the market place has more than long contracts open, and so traders that are longing Bitcoin have to pay compensation to pay traders shorting BTC. That keeps the market balanced and prevents a prolonged downtrend or rally.

On BitMEX, the funding rate of its perpetual Bitcoin futures contract is hovering at 0.05%. If a trader has a $100,000 long position open up, the trader will take to pay $150 per day in compensation to just keep the position open up.

A high funding rate is a negative gene when the price of Bitcoin starts to go down. When BTC declines, traders no longer have the incentive to keep their positions open and compensate curt contract holders at the same time.

Bitcoin is at a potent resistance level

The abnormally high pct of long contracts in the Bitcoin futures marketplace and the high funding rate are seen as potential catalysts of a steep pullback considering BTC is at a strong resistance level.

Since the start of May, the price of Bitcoin tested the $10,000 resistance level a total of three times.

Triple lower highs on the 4H Bitcoin price chart. Source: TradingView

Triple lower highs on the 4H Bitcoin price chart. Source: TradingView

On May 8, BTC went to as high as $x,085 but the cost failed to remain higher up $10,000 and eventually vicious to $8,100. On May 14, BTC surged to $9,970, simply to be met with a fierce rejection to $9,100. Today, for a third time, BTC hit $nine,910 merely failed to push through overhead resistance.

The triple lower loftier, a design equanimous of three low consecutive peaks, increases the likelihood that Bitcoin will experience a sharp correction in the virtually term.