Analyzing the Recent 10% Surge in Bitcoin Cash amidst Market Divergence

On December 19, Bitcoin Cash (BCH) experienced an impressive gain of approximately 10% within just 24 hours, primarily fueled by derivative trading activities. However, the overall market participation appeared mixed, as spot investors seemed to resist this increase, even while leveraged trading rose.

Key Takeaways

Bitcoin Cash (BCH) surged by approximately 10% on December 19, primarily due to derivative trading.
Perpetual Futures traders have adopted a strongly bullish stance, with increased Open Interest and rising Funding Rates.
In contrast, spot investors are reducing their BCH holdings, leading to significant selling pressure.
The technical analysis suggests BCH is near important resistance levels, and a breakout could depend on the strength of ongoing capital inflows.

Bitcoin Cash surged significantly, despite conflicting indicators between leverage and actual demand.

Bullish Sentiment Among Perpetual Traders

Perpetual Futures traders displayed a strong bullish sentiment toward Bitcoin Cash, taking multiple long positions across major exchanges. According to data from CoinGlass, there was a significant uptick in the amount of capital allocated to BCH perpetual contracts on centralized trading platforms. An additional $184 million contributed to raising the total Open Interest to around $786 million during this timeframe.

BCH open interest chart Source: CoinGlass

While an increase in Open Interest doesn’t automatically indicate a bullish trend, Funding Rates offer better clarity on market positions. The Funding Rates, which show whether long or short traders are paying fees based on market trends, indicated that long positions were leading. The Funding Rates shifted positively to about 0.0044%, suggesting that long traders were compensating short traders to maintain their positions. This change signifies rising confidence in further price increases, which aligns with BCH’s recent near 10% daily surge. Conversely, short traders faced difficulties, as liquidation data reported approximately $2.54 million in losses from short positions within the past day.

Spot Investors Scaling Back

In contrast to the bullish outlook among perpetual traders, spot investors were seen pulling back from Bitcoin Cash. Netflows from Spot Exchanges indicated ongoing selling pressure, with holders transferring their coins back onto exchanges. On December 19, around $3.93 million worth of BCH was moved into exchanges for sale.

This was a turnabout from early December when spot investors were accumulating nearly $300,000 in BCH. Since that time, selling has quickened, with outflows overtaking purchases by over tenfold.

BCH spot exchange netflow Source: CoinGlass

The broader weekly trend has remained bearish, with a recorded net outflow of about $4.88 million over the past week, continuing a series of sustained selling. Beginning the week of December 8, investors sold approximately $53.58 million worth of BCH. Ongoing spot outflows could exert downward pressure on prices. Recent rallies may lead holders to opt for selling at higher levels instead of accumulating for potential long-term gains.

Technical Hurdles Looming

Analyzing technical factors, BCH is currently trading within a bullish symmetrical triangle, with prices fluctuating between converging support and resistance levels. This setup typically indicates a favorable condition for an upside breakout; BCH recently neared a local high close to $651. However, for any rally to truly take hold, it’s essential for the price to break through the descending resistance line within the channel and also surpass the horizontal resistance area between $598 and $606.

BCH price chart Source: TradingView

To evaluate the potential for a breakout, AMBCrypto scrutinized the overall capital flow in the market. Data revealed that inflows were stronger than outflows, as indicated by the Money Flow Index, which has entered bullish territory above the 50 level. If this positive trend in capital flow persists, BCH may continue its upward movement and tackle the resistance levels that are currently hindering further gains.