3 Things Bitcoin Traders Should Worry About As BTC Hits ATH

What a week it has been for Bitcoin and the crypto community at large. Tensions over the U.S elections were quite high but Trump’s win turned out to be a massive catalyst propelling BTC to new highs. However, this foray into new territory warrants caution due to the volatility that may come with it.

The prevailing sentiment based on a favorable win was that Bitcoin would surge to new highs and that outcome already played out. Many anticipate more upside in the coming weeks or months, but this does not necessarily mean that it will be a smooth sail onward.

Bitcoin has historically yielded a lot of volatility every time it broke out into new territory in the past. That is because breakouts are typically associated with heavily bullish hype and expectations are usually high. The above description fits the current situation with Bitcoin.

– Advertisement –

Bitcoin Open Interest Soars to New Highs, But..

While new highs tend to manifest in periods of extreme excitement, price action also tends to be extremely volatile. This is largely due to overleveraged trades being liquidated and this may already be playing out as Bitcoin open interest also soared to new highs.

A surge in open interest is usually accompanied by a surge in leverage, and in BTC’s case, it is likely leverage to the upside. An unexpected wave of sell pressure sweeps through this liquidity, leaving a trail of huge losses. The liquidations underpin the massive pullbacks historically observed in volatile conditions.

Bitcoin’s latest situation fits the characteristics that constitute those volatile price swings that eliminate overleveraged positions. The latest large holder flow data may already signal to such an outcome.

Large holder inflows contributed to the bullish momentum by surging from 208 BTC on 3 November to 43,870 BTC by 4 November. An equivalent of more than $3 billion worth pf Bitcoin flowing into large addresses.

Large holder inflows then dropped to 11,460 BTC by 5 November which indicates a significant slowdown. Meanwhile, large holder outflows also soared which means that a significant number of whales have been taking profits.

Bitcoin registered zero outflows on 2 November but that figure surged to 10,290 BTC by 5 November.

Note that the data may be subject to change especially since it was taken before the election results. This meant that the market may have shifted sentiment in favor of more demand from whales.

Volatility Might Hit Hard

Bitcoin ETFs have been a relatively decent yardstick for measuring the level of BTC demand in the market. Looksonchain data for 6 November revealed that Bitcoin had a net flow of -3,755 BTC, which was equivalent to $279.97 million in outflows at the time.

On the plus side, Bitcoin marketcap crossed $1.5 trillion at the time of writing, effectively surpassing Meta which had a $1.44 trillion market cap. This allowed it to secure the 9th spot in the list of top 10 largest assets by market cap.