Bitcoin [BTC] has not experienced widespread holder losses, AMBCrypto recently noted. The percentage of long-term investors sitting on unrealized losses was not as high as the bottoms of the previous cycle.
This has taken away any enthusiasm that the market might have found a bottom after falling to $60,000 in February.
Still, Bitcoin’s continued defense of the $65,000 area and its push past $70,000 have given speculators confidence over the past three weeks. Rising Open Interest (OI) in April indicated more enthusiastic positioning in the derivatives market as Bitcoin rose above $75,000 again.
The increased OI can also lead to price movements driven by liquidity chasing, as speculative confidence usually comes with more debt. This could result in greater volatility for Bitcoin, which has already seen periods of major liquidations since tensions erupted in the Middle East.
Profit-taking undermines Bitcoin enthusiasm
In April, there were three days where BTC short liquidations exceeded $200 million. There had only been one last month, March 4. In mid-January, there were two consecutive days, the 13th and the 14th, where the cumulative short liquidations for Bitcoin alone amounted to $440 million.
In late January and early February, the leading cryptocurrency fell lower as selling pressure increased. The short liquidations in April indicated public disbelief and also helped push prices higher.
The rally may struggle to sustain itself.
Crypto analyst Darkfost reported that BTC has traded within a range of $64,000 to $75,000 since the last week of February. As the crypto leader approaches and exceeds local highs, the incentive to take profits and exit the market among holders has only increased.
The analyst noted that 106,000 BTC flowed to the deposit addresses linked to Binance. Another 130,000 BTC flowed to OKX-linked deposit addresses. Normally, such an influx of BTC indicates increasing selling pressure from investors who may be exhausted by the losses and consolidation earlier this year.
The market is currently at a difficult point. Some participants believe the rally can go ahead. Most remain fearful of another deep correction amid ongoing bear market conditions.
Final summary
- The rising Open Interest over the past three weeks indicated increased speculative confidence in BTC’s short-term bullish trend.
- Increasing selling pressure from currency movements into exchange deposit addresses meant that the rally could see a retrace or even a reversal in the coming days.