Spot Market Activity Signals Shift In Liquidity

The Binance Spot order book has recently cleared a quoted range from a liquidity perspective, indicative of robust spot buying the previous day. However, a notable observation by Skew points out the current lack of spot volume. This absence may be a breather following the high volume but also underscores the market’s cautious stance after a flurry of buying.

With a very thick bid depth and a high short float, it is no surprise that a short squeeze was triggered, aligning with the spot buying trend. Skew draws attention to the “flip in the orderbook towards ask depth,” suggesting higher ask liquidity. This flip indicates that any upward push in the market will likely need to be driven by spot purchases, with declines also dependent on spot activity.

Diving deeper, Skew analyzes the Binance & Bybit Open Interest (OI) and Delta, finding that open interest has been inching higher post-short squeeze. The gap between OI and Perpetual Delta, along with Perpetual Cumulative Volume Delta (CVD), reveals that long positions are more likely to be filled on price dips than shorts to chase the highs. This behavior suggests a market that is cautiously bullish, willing to bet on long-term gains while still hedging for potential downturns.

For Bitcoin to climb higher, Skew highlights the necessity of an influx in spot-taker bids. Interestingly, the funding rates have not surged, implying that the market is far from being “frothy.” In market parlance, “froth” represents an unsustainable rapid pace of price increases accompanied by high trade volumes. The current funding rates, coupled with the OI’s recovery status post-squeeze, suggest a market that is yet to enter a phase of exuberance.

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