Throughout the recent period, the cryptocurrency market has been orchestrating a plot against those holding long positions in Bitcoin [BTC]. An analysis of Open Interest (OI) Heatmap reveals a distinct trend – buyers entering the market, leading to a surge in Open Interest, followed by a reversal in prices that leaves them ensnared.
The price range between $99K and $100K witnessed a notable increase in OI, forming a local peak before BTC experienced a decline. As long positions continue to be ensnared, the question arises: how can bullish investors plan their strategy to propel BTC out of its current downturn?
Bitcoin Futures OI: A Crucial Resistance Level
A month ago, Bitcoin was valued around $106K; however, it is now hovering at $95,415, ensnared in a recurring pattern for the second consecutive period.
During the 105K-106K range, Open Interest surged as traders flocked in, resulting in over $68 billion worth of open positions – marking the highest accumulation of OI.
Nevertheless, as BTC returned to this “break-even” zone, long positions intensified, only to be ensnared as inexperienced traders exited the cycle post locking in profits, leading to millions in liquidations of long positions.
In addition, futures traders increased their exposure to high-risk leverage as BTC approached a peak, causing the leverage ratio to soar – further ensnaring long positions and triggering a series of liquidations. Consequently, this transformed the price range into a formidable resistance level.
Prospects of an Upward Breakout
Recently, the 95K-98K range witnessed a substantial surge in OI, surpassing $60 billion. Notably, this time around, it provided a support zone, entrapping short positions as BTC surpassed $98K.
As Bitcoin remains in this range, the imminent question is whether history will repeat itself.
Could there be a short squeeze that propels BTC beyond $99K, aiming for $100K, prior to the futures market becoming overheated due to excessive leverage?
Given that 52% of positions are short and OI has risen by 1.50%, the market seems poised for a formidable squeeze, trapping short positions and converting the $99K-$100K range into a local bottom.
Nonetheless, a decline in OI could indicate a bullish signal, potentially allowing Bitcoin to breach critical resistance levels. Failure to do so may result in Bitcoin being trapped in a recurring cycle of long position entrapment at each peak. The upcoming days are crucial in determining Bitcoin’s next move.