As someone who has weathered multiple market cycles and seen Bitcoin rise and fall numerous times, I must admit that the current situation gives me pause. The increasing leverage and record open interest have been red flags for me in the past, and they are certainly catching my attention now.
Bitcoin (BTC) initiates the resurgence of “Uptober” as it records its strongest weekly closing in almost five months and reclaims the level of $69,000.
- Week three of October is getting bulls excited about a retest of all-time highs, but an equally healthy consolidation could well come first.
- Jobless claims and the Fed Beige Book headline the week’s macro data releases while risk assets shrug off United States inflation cues.
- Opinions are diverging on whether BTC/USD has managed to ditch its seven-month downtrend for good.
- Leverage is giving some analysts a headache as exuberance mounts in Bitcoin derivatives.
- Mainstream consumer interest in Bitcoin is still nowhere to be seen.
Bitcoin bounces back with a swipe at $69,000
In the final moments, a strong surge ensured a closing week worthy of pride for BTC/USD, as per data from CryptoMoon Markets Pro and TradingView.
At just over $69,000, the close was Bitcoin’s highest since the start of June.
Traders pondered over several temporary situations, such as an initial dip followed by stabilization, prior to a resumption of bullish trends.
On the specialized discussion platform about X, well-known trader CrypNuevo identified potential resistance in Bitcoin’s price movement as the upcoming obstacle that needs to be surmounted, due to the presence of nearby market liquidity.
“There is a major liquidation level and that’s to the upside, exactly at $69.3k,” he noted.
“The liquidations at that level have increased over the weekend due to some traders opening shorts in this range. It would make sense to spike up to that $69.3k area first.”
In simple terms, an upcoming event might momentarily discomfort bulls. Specifically for CrypNuevo, there’s a possibility that the 50-period exponential moving average (EMA) on 4-hour charts, currently at $66,888, may undergo a retest.
In an ideal scenario, we can grasp both parts – holding the main body and the upper section of the channel, to verify a breakout and hint at a possible rise.
Based on his analysis of the Relative Strength Index (RSI), Daan Crypto Trades suggests that Bitcoin should take the lead in driving a prolonged surge in the cryptocurrency market.
As a researcher, I’m emphasizing the importance of maintaining the positive trend we’ve seen so far in my recent updates.
“$70K is a big level.”
Macro triggers simmer ahead of US election
This week has been relatively tranquil regarding major U.S. economic data releases, making unemployment figures the main focus for cryptocurrency and risk asset traders.
The initial unemployment claims report, scheduled for release on October 24th, follows a day after the Federal Reserve’s most recent assessment of the economy, commonly referred to as the “Beige Book.
Over the past few weeks, there’s been a surge in stock prices that seems to disregard rising signs of inflation, making it a hot discussion point nonetheless.
As a crypto investor, I’ve observed that Supercore inflation, which had substantially dropped during the initial half of 2023, has started to recover. Simultaneously, the core Consumer Price Index (CPI) inflation climbed up to 3.3%, marking the first rise since March 2023, according to The Kobeissi Letter’s latest analysis.
“All while the Fed cut rates by 50 basis points in September. Did we really need a 50 bps rate cut?”
Kobeissi pointed out that the upcoming earnings season and the U.S. Presidential Election, which is only two weeks off, could significantly influence market mood in the near future.
According to the most recent information from CME Group’s FedWatch Tool, there is over a 90% chance that the Federal Reserve will lower interest rates by 0.25% during their meeting scheduled for November 7, which is just two days after the election.
In a recent post about the subject, the CEO of cryptocurrency evaluation platform Evai, Matthew Dixon, stated that the dollar is significantly increasing in expectation of this event.
“However, Crypto assets are shrugging off the risks and putting in a powerful rally ahead of the Nov 5th election. Remember, trend is your friend!”
Contention over BTC price breakout
Bitcoin’s recent moves have placed an entire seven months of BTC price action in focus.
After reaching record highs in March, the Bitcoin to US Dollar (BTC/USD) pair has been confined to a descending channel, providing a series of decreasing peaks and troughs – up until this point.
According to CryptoMoon’s latest updates, we observed a bullish trend over the weekend as the daily candles closed above their resistance line. This development was further strengthened by the weekly close, which supported the breakout signal.
What should be next, popular trader and analyst Rekt Capital says, is “at least” $70,000.
Not everyone, however, agrees that Bitcoin has left the channel behind once and for all.
Peter Brandt, an experienced trader, noted that a seven-month inverse expanding triangle pattern is still developing based on the chart he analyzed, which was posted as part of a Bitcoin discussion on October 21st following the weekly close.
“The sequence of lower highs and lower lows from Mar 2024 has NOT yet been violated.”
According to data collected from the monitoring system CoinGlass over the last six months, a significant amount of offers can be found slightly above $70,000. Additionally, potential resistance points are noticeable around $72,000.
Leverage raises eyebrows amid record open interest
With Bitcoin reaching new highs at $69,000, some analysts are expressing caution due to the surge in open interest.
Recently, the CryptoQuant onchain analytics platform issued a cautionary note in their Quicktake blog post on October 19th, indicating that the level of borrowing or leverage among cryptocurrency users has been escalating rapidly, which could potentially pose a concern.
In the world of derivatives trading, the use of leverage is often seen as a powerful tool for maximizing profits. However, it’s important to remember that while leverage can be beneficial, it also carries substantial risks that shouldn’t be overlooked – especially during market volatility. This is a cautionary note from contributor CrazzyBlockk.
The post referenced an altered version of the Estimated Leverage Ratio (ELR) metric, which includes both Bitcoin and stablecoin reserves.
According to CrazzyBlockk, it has become more common for stablecoins to be utilized as security for derivative trading transactions in recent times.
“As a result, when looking at this metric, which has seen a sharp spike, it becomes clear that the Bitcoin derivatives market is now in a risk zone. This means the market is prone to any impulsive movements, whether bullish or bearish.”
Another metric flashing a warning is the Bitcoin Heater from quantitative Bitcoin and digital asset fund Capriole Investments.
The device that gauges “the ratio of heat in Bitcoin’s Perpetuals, Futures, and Options, considering the Open Interest,” has reached its peak levels since the middle of 2022.
According to AetherX Capital on their popular account, the heater is now too hot and might stay that way for some time. However, they predict that it will ultimately need to be reset.
“The pullback or correction may start at current levels or higher. So caution is advised especially with leveraged positions.”
Bitcoin retail interest stays absent
As an analyst, I must acknowledge the widespread chatter about Bitcoin reaching $69,000 again; however, its mainstream participation remains notably sparse from my perspective.
Data from Google Trends highlights the observation that while Bitcoin prices are approaching record levels, there’s little enthusiasm for its price movement beyond crypto communities.
Currently, on a scaled range of 0 to 100, the search term “Bitcoin” is at 22 – this is its lowest point in the last year and one of the lowest values seen over the past four years.
In the past week, the well-known Bitcoin analytics account, Bitcoindata2021, shared a unique analysis on Bitcoin’s retail demand that also indicated record lows in the broader market perspective.
In the following discussion, they didn’t seem to hesitate to suggest that a quick jump to around 90-100k might be the key to gaining their interest.
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2024-10-21 11:38