Bitcoin appears to be under pressure at the moment as BTC price is down 1.17% at the $37,300 level with a market cap of $729 billion. As BTC price falls below the $37,500 level, further Bitcoin liquidations and a significant increase in Open Interest (OI) are likely to occur.
Bitcoin Open Interest in the Danger Zone
Popular crypto trader CrediBULL crypto points to a significant increase in open interest (OI) for Bitcoin derivatives. This suggests that many leveraged traders have adjusted to this price drop rather than being squeezed (washed out) from the market. This is far from ideal as it suggests that leveraged positions continue to predominate, leading to increased market risk.
The analyst added that the mention of OI being back in the “danger zone” suggests that the market is in a precarious state with high leverage, indicating the potential for more volatility. He points out that this increased volatility does not necessarily provide a clear direction for the market.
The two possible scenarios mentioned are a “large short squeeze” (a rapid rise in price as short sellers cover their positions) or a “prolonged flush back down” (a sustained decline in price).
If a short squeeze results in price rallying above a certain level (37.6K), it can be safe to enter a position. On the other hand, if there is a long squeeze and the price continues to fall, an opportunity to buy at a lower price could arise.
Two possible scenarios for BTC
The crypto analyst illustrates two possible scenarios on a standard chart. Here is the current analysis:
- Local low recovery scenario: If the market successfully recovers and recaptures recent local lows, consider short liquidations (Liqs) targeting the 38K to 38.2K area.
- Scenario where local lows cannot be recovered: If the market fails to recover and reach recent local lows, consider long liquidations (Liqs) in the 36.6K to 36.9K range.
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