- Bitcoin hits new highs but could be due for a leverage shakedown.
- Large holder activity signals a surge in profit-taking.
As a seasoned researcher with over a decade of experience in the cryptocurrency market, I have witnessed numerous cycles of boom and bust. The latest surge in Bitcoin [BTC] to a new all-time high is indeed an exciting development, but my personal perspective is tinted with a dose of caution.
On November 7th, Bitcoin reached an unprecedented peak of $76,849. Notably, when Bitcoin last hit its all-time high of $69,000 in 2021, the U.S. Federal Reserve commenced raising interest rates shortly following this event.
As a researcher, I was observing the market dynamics, and the prevailing perspective was that the market was oversaturated with liquidity, leading to an upward trend in inflation rates.
Skipping ahead to mid-year 2024, the Federal Reserve (FED) has shifted its stance towards reducing interest rates. This week, the U.S. regulatory body declared another reduction of 0.25 percentage points in the interest rate. However, what makes this significant?
As a researcher, I’ve observed that ongoing reductions in interest rates will bolster market liquidity, a trend that became apparent following the previous interest rate reduction.
With the recent interest rate reduction, Bitcoin could potentially experience a smoother path towards further gains.
Although a decrease in interest rates might stimulate investor optimism, positions that are heavily leveraged could potentially lead to forced liquidations. As per CryptoQuant, Bitcoin’s Open Interest and estimated leverage ratio have reached their year-to-date peaks recently.
The high leverage suggested that bullish expectations remain high. However, it also highlights the risk of long liquidations if the price snaps back down.
Is Bitcoin experiencing sell pressure from profit-taking?
In simpler terms, having many investors with large positions (often referred to as ‘whales’) could take advantage of a situation where many people have bought stocks on credit (leveraged longs). This is because as more traders join in due to fear of missing out if prices rise further, they will offer opportunities for these initial sellers to exit the market.
The significant decrease in Bitcoin being transferred to large holder wallets suggests a substantial slowdown in the transfer of Bitcoins to whale accounts. This number fell drastically from approximately 43,870 BTC on November 4th to just 1,160 BTC by November 7th.
Contrarily, a significant increase in Bitcoin outflows from large holders reached 15,370 BTC by the 6th of November. It’s worth mentioning that this amount had decreased to 2,430 BTC on the 7th of October.
Over the past five days, a significant decrease in whale purchases, as evidenced by data flowing from the major storage facility, has been observed.
Additionally, it’s evident that the rate of funds leaving large account holders exceeded the rate of incoming funds, indicating an increase in selling pressure from these significant investors.
Bitcoin was already overbought in the last 24 hours, thus increasing the chances of a reversal.
Read Bitcoin’s [BTC] Price Prediction 2024–2025
While a bearish outcome could occur during the weekend, traders should also consider the other side of the coin.
Overly positive expectations might result in less potential loss, as an increasing number of individuals anticipate price hikes. However, the substantial amount of borrowing implies that Bitcoin could experience significant fluctuations in the near future.
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2024-11-08 13:43