Bitcoin (BTC) Price Volatility Ahead As Open Interest Moves in the “Danger Zone”

Bitcoin seems to be currently under pressure as the BTC price is trading 1.17% down at $37,300 levels with a market cap of $729 billion. As the BTC price drops under $37,500 levels, more Bitcoin liquidations are likely to take place with a significant rise in the Open Interest (OI).

Bitcoin Open Interest In Danger Zone

Popular crypto trader CrediBULL crypto points out a significant rise in the Open Interest (OI) for Bitcoin derivatives. This indicates that many leveraged traders positioned themselves for this price drop instead of being cleared out of the market (washed out). This is less than ideal because it suggests that leveraged positions are still prevalent, 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, signaling the potential for more volatility. He points out that this increased volatility doesn’t necessarily provide a clear direction for the market.

The two possible scenarios mentioned are a “major short squeeze” (a rapid increase in price due to short sellers covering their positions) or a “continued flush back down” (a sustained decline in price).

If there’s a short squeeze leading to a price rebound above a certain level (37.6k), it might be safe to enter a position. On the other hand, if there’s a long squeeze and the price continues to decrease, there could be an opportunity to buy at a lower price.

Two Possible Scenarios for BTC

Crypto analyst illustrates two possible scenarios on a standard chart, here’s the current analysis:

1. Reclaiming Local Lows Scenario: If the market successfully rebounds and reclaims the recent local lows, consider taking short liquidations (liqs) targeting the range of 38k to 38.2k.
2. Failing to Reclaim Local Lows Scenario: If the market fails to recover and does not reclaim the recent local lows, consider taking long liquidations (liqs) in the range of 36.6k to 36.9k.

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.