After a short-lived correction in the below-key area, the Bitcoin price is back above USD 50,000. However, with the cryptocurrency recapturing half the point to $ 100,000, open interest has skyrocketed.
The sudden sharp spike in open positions has made traders cautious at the moment. Here you can see in more detail why this is the case and what could result from it.
Open Interest climbs alongside Bitcoin as it tops $ 50,000
Bitcoin is still surging from the $ 58,000 sell-off that caused the cryptocurrency to drop 20% in a matter of days. The leading cryptocurrency couldn’t top a market cap of $ 1 trillion, despite temporarily passing the milestone.
Related reading | The bid side in Bitcoin disappears amid a shaky “macro environment”.
Price movement is now back above $ 50,000, but on the way up the market has added what a pseudonymous crypto trader calls “tons” of open interest.
Open interest has risen to over $ 50,000 since the collapse Source: hyblockcapital.com
According to the trader, this suggests that others were long on the way up and were expecting the price to rise significantly. An increase in leverage could provide enough fuel for a deeper correction if long positions are forced to cover in the midst of a stronger sell-off.
Markets often take the path of maximum pain, which can lead to a cascade of long liquidations on the way further down.
The many reasons crypto traders need to proceed with caution
Bitcoin is in an uptrend and should be viewed in an uptrend according to Dow Theory until the market says otherwise. But all bull cycles are coming to an end and the final could come anytime.
Traders should be wary of a long press right now, as highlighted above, but the specs are showing signs of exhaustion.
Technical data could also point to a major correction in Bitcoin | point out Source: BTCUSD on TradingView.com
A TD Sequential TD 9 sales setup for the unused period of two weeks has raised two candles ago. The TD 9 acted as the exact top in 2019, taking exactly two candles after its release in 2017 before the reversal occurred.
Related reading | This unique take on Bitcoin suggests a bear phase is near
Here it is, two more candles after the TD 9 sell setups, after a red doji, and during the bloodiest month in Bitcoin history. The current two-week candle has more than ten days left, and when it closes red and is below $ 40,000 per BTC, an evening bearish star pattern has formed.
An evening star pattern following a TD 9 while the MACD and RSI are at record levels could mean that a significant correction is due. With such a high level of open interest, there are many reasons why traders should proceed with caution.
Featured image from deposit photos, charts from TradingView.com
