Bitcoin no longer in ‘easy mode’ — expect a leverage wipeout, observers warn

Traders holding Bitcoin on margin may be in for an unpleasant shock as the digital currency reaches a significant juncture, potentially leading to unpredictable price swings, caution analysts.

“HoneyBadger, a pseudonymous crypto trader, stated in a recent April 11 post on X that the market was previously quite forgiving, but now there’s excessive leverage and market makers are profiting significantly from investors’ heightened emotions and questionable behavior.”

“Market makers are having the best time ever chopping everyone up,” he added.

Approximately $39 million in Bitcoin leveraged bets were terminated on CoinGlass during the last day, including $18.38 million from long positions and $20.62 million from short positions.

HoneyBadger indicated towards the Bitcoin price graph, showing a symmetrical triangle formation. This pattern is neutral and doesn’t lean toward a clear bullish or bearish trend like an ascending triangle for bulls or a descending triangle for bears, making it harder for traders to predict the future direction.

Traders could mistakenly take his belief as a sign to buy, interpreting it as a repeat of the triangle formation. However, he cautions that this might result in a false signal, where the price temporarily exits the pattern before returning.

According to Andrew Kang, the Mechanism Capital co-founder, the positive trajectory of Bitcoin’s price will persist and reach even greater heights in the wake of its halving on April 20th.

“I expect BTC to touch $80K by May,” he said in an April 11 post on X.

According to CoinMarketCap’s latest figures, Bitcoin is now priced at around $70,500 after undergoing three tests of its lower boundary at $68,500 within the last seven days.

On April 10, the price of Bitcoin momentarily dipped 3% below its support threshold in reaction to the publication of disappointing US inflation figures.

More recently, Bitcoin’s price took a unexpected dive of approximately 5%, from $69,450 to $65,970 on April 2. This decline led to the liquidation of around $50 million worth of long Bitcoin positions.

In contrast, the rise in traders’ leveraged bets over the last several days indicates that a future 5% decline could result in more significant losses for those holding long positions.

Based on data from CoinGlass, around $2.14 billion worth of short positions on Bitcoin would be wiped out if its price rose by 5% to hit $73,819.

According to Peter Schiff, who is a strong advocate for gold and a skeptic of Bitcoin, he believes that an excessive number of individuals have purchased Bitcoin with overconfidence in its ability to avoid losses.

“Speculators often find markets don’t turn out as expected. Instead, they frequently experience disappointment,” he wrote in a blog post on X, published on April 11.

If Bitcoin’s price decreases by 5% to $66,671, approximately $1.63 billion in long position contracts will be forced to close.

HoneyBadger expressed his decision to keep away from trading in the current market due to its volatility and isn’t concerned about missing out on short-term price drops. Following suit, Arthur Hayes announced that he will stay away from cryptocurrency trading until May, anticipating a possible market correction or sell-off.

“I prefer to be patient and bide my time, rather than acting too quickly. If I make a mistake, though, my preserved funds allow me to recover later on.” (HoneyBadger’s approach is to wait for the opportune moment instead of rushing into things, and if an error occurs, they can still recover with their saved capital.)

In a similar vein, crypto trading expert Jelle warned his 78,500 followers to remain cautious and avoid taking excessive leverage that could potentially result in significant losses.

2024-04-12 07:14

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