• The low order book liquidity suggests an impending bull reversal, according to Hyblock Capital.
• Negative funding rates point to a potential short squeeze.
• The market is fast moving into a positive macro environment, LondonCryptoClub said.

Bitcoin (BTC) order books, which show the supply and demand dynamics for the largest cryptocurrency, are signaling a potential price bottom and a bullish shift on the horizon.

Data tracked by Hyblock Capital shows market depth, or the collection of buy and sell orders, both close to the going market rate and further away, dried up over the weekend. That's a pattern usually observed at market turning points, suggesting an end to BTC's decline from late-August highs above $65,000.

Liquidity, represented by market depth, gauges the market's ability to absorb large trading orders without influencing price. It tends to depend on several factors, including the time of day, prevailing market events and specific price levels.

Market bottoms are characterized by traders struggling to make decisive moves, leading to fewer buy and sell orders and a decline in liquidity.

"By analyzing the combined spot order books, particularly at the 0%-1% and 1%-5% spot order book depth, we see a pattern where low liquidity in the order book often coincides with market bottoms," Shubh Verma, co-founder and CEO of Hyblock Capital, said in an interview with CoinDesk. "These low order book levels can be early indicators of a price reversal, frequently preceding a bullish trend."

"It's a signal worth monitoring for traders looking to catch significant movements before they unfold. Understanding these imbalances can help identify key turning points in the market," Verma said.

The 1% market depth shows the total volume of buy and sell orders within 1% of the current mid-market price. The 5% depth represents liquidity 5% away from the current mid-price. Hyblock tracks market depth across multiple exchanges, including Binance and Coinbase.

Potential short squeeze and positive macro

Bitcoin changed hands at $54,800 at press time, up 4.3% from Friday's low of $52,530, according to TradingView data. Still, funding rates in the perpetual futures market tied to bitcoin remain negative, indicating a bias for bearish bets known as shorts, according to Coinglass .

So, if the market remains resilient, bears may throw in the towel, squaring off shorts and putting upward pressure on prices.

"Positioning remains light, and with funding [rates] negative, the short-term 'pain trade' is perhaps higher," the LondonCryptoClub newsletter said in Sunday's edition.

The market is fast moving into positive macroeconomic developments for bitcoin, according to the newsletter.

"Fiat, debt driven economies cannot sustain high real rates. The window to normalise rates and reduce central bank balance sheets, withdrawing liquidity, are typically small and that window has now firmly closed. Whilst we encourage short term caution as the market seeks assurances that the Fed will keep the party going, rest assured the punch bowl is about to be returned. Bitcoin and broader crypto investors will be getting drunk again quite soon," the newsletter reads.