On the 7th of November, Bitcoin (BTC) surged to a new all-time peak of $76,849. In 2021, when BTC reached its previous high of $69,000, the U.S. Federal Reserve began to raise interest rates shortly thereafter.
Back then, the narrative was centered around the market being flooded with liquidity and inflation starting to rise.
Now, in the latter half of 2024, the Fed has shifted its stance towards reducing rates. Recently, the U.S. regulator announced a 25 basis point rate cut. But what implications does this hold?
The decrease in rates is expected to further enhance market liquidity, a trend that was already noticeable after the last rate reduction.
With the latest rate cut, Bitcoin might find smoother sailing towards more gains in the future.
Despite the potential boost in investor confidence from the rate cut, there is a risk of liquidation for highly leveraged long positions. According to CryptoQuant, Bitcoin’s Open Interest and Estimated Leverage Ratio have been lingering near their highest levels for this year.
The elevated levels of leverage suggest that bullish sentiment remains strong. However, it also flags the vulnerability to long positions being forced to liquidate if the price takes a sharp turn downwards.
Is Bitcoin Facing Selling Pressure from Profit-Taking?
The current scenario, driven by leveraged long positions, might offer an opening for big players to influence the market. An influx of buying activity from traders eager to join in before potential price spikes could provide exit opportunities for sellers.
The movement of Bitcoin into large holders’ wallets indicated a significant slowdown in the flow of BTC entering such addresses. The amount dropped from 43,870 BTC on November 4th to 1,160 BTC by November 7th.
In contrast, there was a notable increase in Bitcoin outflows from these large holders, reaching 15,370 BTC by November 6th, compared to 2,430 BTC on October 7th.
The data on large holder flows confirmed a considerable decrease in buying pressure from whales over the past few days.
Furthermore, the outflow of Bitcoin from large holder addresses exceeded the inflows, indicating a rising selling pressure from whales.
Bitcoin was already in an overbought state in the past 24 hours, heightening the likelihood of a reversal.
While a bearish outcome might unfold during the weekend, traders must also acknowledge the bullish case.
Excessive optimism could limit downward movement as more individuals expect higher prices. However, the high level of leverage hints at impending volatility for BTC.