Bitcoin trades above $90K: Heres what bulls must do to extend the rally

Bitcoin has recently crossed the $90,000 threshold, but analysts caution that this upward trend is precarious. In order to maintain momentum, there is a pressing need for increased volume in both the spot and futures markets. Current on-chain data suggests that the conditions supporting this rally are not robust.

BTC spot demand must improve above $84,000 cost basis

The recent surge in Bitcoin’s price can be attributed to a significant cost-basis cluster around $84,000, where over 400,000 BTC were purchased. This zone is viewed as a potential support level. However, the challenge lies in the limited participation from buyers above this threshold. Order books show a lack of depth, indicating that prices are moving through areas with minimal buyer engagement. For Bitcoin to maintain its position above $90,000, it is critical that this dynamic shifts from passive accumulation to active demand.

Liquidity needs to stabilize as short-term holders lose confidence

Recent observations by market analysts indicate that Bitcoin is trading below the short-term holder (STH) cost basis of $104,600. This situation places the market in a low-liquidity environment reminiscent of the early 2022 phase following Bitcoin’s all-time high. The current price compression between $81,000 and $89,000, combined with substantial realized losses averaging $403 million per day, suggests that many investors are opting to exit rather than capitalize on the current market strength. The STH Profit/Loss Ratio dropping to 0.07x further emphasizes the decline in demand momentum. For a positive trend reversal, it is essential that realized losses decrease and the profitability of short-term holders recovers above neutral levels.

BTC futures markets need offensive buy bids

The recent breakout to $91,000 has been primarily driven by short positions being covered, rather than new long positions being established. The open interest in futures contracts has seen a decline, and the cumulative volume delta remains flat. The market’s funding rates, which are hovering around neutral, reflect a cautious sentiment in the derivatives environment. While leverage is being reduced in an orderly manner, there is a noticeable absence of aggressive buying from traders. For a sustainable upward trend, it is vital to rebuild open interest on the long side, supported by genuine demand rather than merely reacting to forced short liquidations.

As Bitcoin attempts to solidify its gains above $90,000, the market will be closely watching how these dynamics evolve. Increased participation from spot buyers and a more favorable environment in the futures markets could provide the necessary support for this rally to continue effectively.