Bitcoin Futures Market Signals Bullish Momentum as Short Liquidations Dominate

Despite a recent cooling in price, Bitcoin’s futures market is flashing bullish signals, suggesting the leading cryptocurrency may be gearing up for another leg upward, even as leveraged traders get wiped out in liquidation cascades.

Data highlighted by market analyst Axel Adler Jr. earlier today reveals a liquidation dominance oscillator hovering around -11%. This negative reading indicates a clear skew towards the forced closure of bearish or short contracts.

Institutional Bets Drive Market Dynamics

In his post on X, Adler noted, “the predominance of short-contract liquidations points to buyer strength in the futures market.” Crucially, he observed the absence of extreme readings such as the -19 seen in April 2024 or the -24 from January 2023, suggesting the market is exhibiting bullish momentum without the dangerous “overheating” that often comes before sharp local reversals.

This futures activity is unfolding against a backdrop of consolidation with BTC retreating by about 5.8% from its record peak of $111,814 set on May 22. At the time of this writing, the crypto asset was trading at $105,366, effectively flat on the day. In the last month, it gained 11.2%, even though it dipped 3.2% over the past seven days, slightly underperforming the broader crypto market, which declined by 2.2% over the same period. The retracement, while significant, seems to be part of a wider cycle of profit-taking and leverage cleansing.

In a June 3 report, analysts from Bitfinex highlighted that open interest in BTC options peaked at $49.4 billion last week, $6 billion above the previous ATH, before it slid to $39 billion after May 29 expiries. According to them, the futures market followed a similar path, with high derivatives, reflecting growing institutional involvement and expectations of increased volatility.

This view is similar to that of veteran technical analyst Willy Woo, who warned that BTC is currently vulnerable to what he called “liquidation hunts” because of inflated open interest, which had risen to $80 billion before falling slightly to $72 billion.

According to Woo, the current market conditions are a “perfect setup” for forced flushouts before Bitcoin resumes its upward trend.

Underlying Strength Suggests Bullish Continuation Ahead

However, institutional conviction appears to be growing in the middle of the short-term turbulence. Jamie Coutts, chief crypto analyst at Real Vision, pointed out in a post on X that BTC is outperforming traditional risk assets on a volatility-adjusted basis. He stressed that the asset’s rising hash rate, now at an all-time high, was a key indicator of network strength and long-term resilience.

Retail interest, however, remains tepid. Daan Crypto Trades noted today that search volume for “Bitcoin” has dropped following the post-election bump, suggesting that the latest cycle is largely institution-driven.