Key Takeaways
Bitcoin is facing strong resistance at $122k, despite holding steady above the $118.5k support level. A surging Stock-to-Flow ratio and positive funding rates seemed to support long-term bullish sentiment too.
Bitcoin [BTC]’s latest rally slowed after a rejection at the $122,000 resistance zone, with the same aligning with a key Fibonacci retracement level. At the time of writing, BTC was trading at around $119,000, holding above its ascending trendline support at $118,500.
Such a setup is a sign of short-term indecision, especially as buyers attempt to regroup while sellers defend the overhead resistance. The Relative Strength Index (RSI) sat within a neutral zone too – A sign of balanced momentum.
However, sustained trading above the $118,500-level could provide the springboard for another test of the $122,000-ceiling in the coming sessions.
Source: TradingView
Stock-to-flow ratio surge signals tightening supply conditions
Bitcoin’s Stock-to-Flow ratio surged by over 300% to 2.1233M – Hinting at a sharp tightening in supply conditions. This spike indicated that fewer new coins have been entering circulation relative to the total existing supply. This might potentially support higher valuations over time.
Historically, such hikes have coincided with bullish price cycles. Especially as scarcity drives demand.
Worth pointing out, however, that this long-term bullish signal still faces short-term hurdles from its press time resistance levels.
While scarcity might support an eventual breakout, traders must contend with immediate technical barriers before the upside trend can resume.
Futures market activity cools down as traders reduce exposure
The Futures Volume Bubble Map underlined cooling activity – A sign that traders have been taking a more cautious position after recent volatility. Reduced Futures positioning often points to less speculative pressure, something that can limit sharp price swings in the short term.
Such a calmer market environment might help Bitcoin consolidate, before its next major move.
On the contrary, lower speculative demand might also slow upward momentum unless new catalysts emerge.
Therefore, the Futures market cooling down may be a double-edged sword. While it may provide some stability, it could potentially delay aggressive rallies until fresh demand returns.
Are positive funding rates hinting at bullish conviction?
At the time of writing, Bitcoin’s OI-weighted funding rate was positive at 0.0097%. This hinted at sustained bullish bias among leveraged traders. Positive rates mean long positions are paying shorts, a sign that more traders expect the price to rise.
This sentiment, combined with the Stock-to-Flow ratio surge, could allude to underlying confidence despite short-term pullbacks.
Funding rates alone cannot break resistance levels though. In fact, they work best when paired with rising spot demand too.
To put it simply, while derivatives data highlighted optimism, spot buying must increase to convert sentiment into a decisive bullish breakout above $122,000.
Can bulls clear $124,000 and set new highs?
A sustained push above $122,000 could open the path towards the $124,000 Fibonacci extension target. The support level at $118,500 remains critical for this bullish scenario, as a break below could invite deeper pullbacks towards $116,000.
A combination of tightening supply, positive funding rates, and resilient trendline support favors the bulls right now.
