Bitcoin [BTC] Investors should take this into consideration before going too far

Bitcoin [BTC] The bulls are finally getting paid after what seemed to be the longest wait. It made an impressive rise, especially in the past two days, confirming the return of volatility, in contrast to the performance of the past few weeks.


Here’s AMBCrypto’s Bitcoin (BTC) Price Predictions for 2022-23


Bitcoin’s mid-week rebound may tempt many traders to buy back in anticipation of an upward move. One reason for the recent rally could be a double-edged sword that investors should also be wary of. Low trading volumes and adverse market conditions encouraged the bearish outlook, with many investors anticipating further declines.

Guaranteed short liquidations lead to more selling pressure

A week ago, we noticed a higher demand in the derivatives market compared to the spot market. One possible reason for this was positions with high leverage. As most traders expected a further decline, most of the leveraged positions were short sellers. As a result, the upward trend of bitcoin over the past two days has led to a severe liquidation of the leveraged shorts.

Source: messari

Over 16,000 leveraged short positions have been liquidated in the last 24 hours, at the time of writing. Interestingly, Bitcoin funding prices fell over the same period, indicating that most demand for BTC was for short positions. Hence the case when the price began to rise.

The same metrics revealed a decrease in liquidations of leveraged short positions, confirming traders’ exits. The estimated leverage of Bitcoin remains high despite the liquidations. Confirmation that investors are now turning to long positions.

Estimated leverage ratio for BTC

Source: CryptoQuant

The shift to leveraged loans underscores the same reasons why the market experienced increased volatility in the middle of the week. Positions with higher leverage lead to more price sensitivity. Movement against the expected direction leads to major liquidations.

A look at Bitcoin spot demand reveals that whales are piling up, but demand remains low. Addresses with more than 100 BTC and those with more than 1,000 BTC have shown a slight increase in the past two days.

BTC order

Source: Glassnode

Despite this upside, the Purpose Bitcoin ETF, one of the major institutional indicators, has not posted much upside. This, combined with relatively low demand from whales, indicates a high probability that the recent upside may be limited.

What happens to the bitcoin price movement?

Bitcoin is sure to see a sell-off sometime soon when investors start taking profits. Bitcoin is trading at $20,909 at press time, following an 8% rally in the past 24 hours.

Bitcoin price action

Source: TradingView

Earlier this week, we highlighted the potential for a breakout or breakout of a wedge pattern. The outcome was in favor of the bulls, but the price is now approaching overbought territory. This means that we could see selling pressure return, but it is likely above the $22,000 range.

conclusion

Bitcoin investors should proceed with caution, especially given that the market is characterized by declining institutional demand and whales. The higher leverage ratio can make Bitcoin more vulnerable to selling pressure.

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