The bearish sentiment in the bitcoin (BTC) futures market hit a record low last week, likely indicating the worst of the plunge in the leading cryptocurrency is behind us.
The non-commercial futures contracts of Bitcoin futures, traded by large speculators and hedge funds, totaled a net position of -1266 contracts in the week ended Aug. 21 – the lowest on record, according to the data released by the Commodity Futures Trading Commission (CFTC) on Friday.
The futures data indicates the speculators are the least bearish on BTC since the futures listing back in December.
A negative total represents net short positions (bearish bets) and a positive tally indicates net long positions (bullish bets).
The sharp drop in the bearish sentiment, as represented by the steady decline in the net short positions from the high of -1945 seen ten weeks ago to -1266, adds credence to the signs of bearish exhaustion indicated by BTC’s defense of $6,000 since mid-June.
At press time, BTC is changing hands at $$6,715 on Bitfinex.
As seen in the above chart, BTC printed lows below $6,000 three times in the last ten weeks, but the drop was short-lived, that is, all three weekly candles closed (Sunday’s close as per UTC) above the psychological mark.
So, it seems safe to say that for BTC, the path of least resistance is on the higher side. The short-term technical charts are also echoing similar sentiments.
The upward sloping 5-day and 10-day moving averages (MAs) indicate a short-term bullish setup. Further, the 50-day MA is about the cross the 100-day MA in a bull-friendly manner.
The ascending trendline and the rising 50-candle MA and 100-candle MA favor a move higher toward $7,000.
That said, BTC’s inability to cross the psychological hurdle of $6,800 over the weekend is a slight cause for concern. However, only a break below the channel support, currently seen at $6,600, would abort the short-term bullish view.
The bearish net positions in the bitcoin futures markets hit a record low last week, validating the argument put forward by the technical charts that the cryptocurrency has likely bottomed out around $6,000.
A break above $6,800 (psychological resistance) would bolster the already bullish technical setup and would open the doors to $7,000.
A move below the ascending trendline seen in the 4-hour chart would weaken the bullish case and could yield a drop to $6,230 (Aug. 20 low).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View