- Bitcoin hits new highs but could be due to a leverage shakedown.
- The activity of large holders indicates an increase in profit-taking.
Bitcoin [BTC] reached a new all-time high on November 7 at $76,849. When BTC reached its previous all-time high of $69,000 in 2021, the US Federal Reserve began raising interest rates shortly afterwards.
The story at the time was that there was too much liquidity in the market and that inflation was rising.
If we fast forward to the second half of 2024, the FED opts for an interest rate cut. The American regulator has just announced a new interest rate cut of 25 basis points. But why is this important?
Lower interest rates will continue to improve liquidity conditions in the market, a result that was already evident after the previous rate cut.
The latest interest rate cut announcement means Bitcoin may therefore have a smoother time reaching more upside potential.
While the new rate cut may boost investor confidence, leveraged long positions risk liquidation. According to CryptoQuant, Bitcoin’s open interest and estimated leverage ratio have recently been hovering within their highest YTD levels.
Source: CryptoQuant
The high leverage suggested that bullish expectations remained high. However, it also highlights the risk of long-term liquidations if the price falls again.
Is Bitcoin Experiencing Selling Pressure Due to Profit Taking?
The current situation, supported by leveraged long positions, could provide an opportunity for whales to play the market. The inbound buying momentum from traders fearful of missing out if prices rise will provide exit liquidity to sellers.
The large influx of Bitcoin holders indicated a sharp slowdown in the amount of BTC flowing to whale addresses. The figure dropped from 43,870 BTC on November 4 to 1,160 BTC on November 7.
In contrast, large investor outflows rose to 15,370 BTC on November 6. Note that by October 7, this figure had dropped to 2,430 BTC.
Source: IntoTheBlock
The high holder flow data confirmed that buying pressure on whales has eased significantly over the past five days.
The outflow from the addresses of large farmers was also higher than the inflow, confirming that the selling pressure from whales was increasing.
Bitcoin was already overbought in the past 24 hours, increasing the likelihood of a reversal.
Read Bitcoin’s [BTC] Price forecast 2024–2025
While a bearish outcome could emerge over the weekend, traders should also consider the other side of the coin.
Extreme optimism can lead to a limited downtrend as more people hold on in anticipation of higher prices. Nevertheless, the high level of debt burden suggested that BTC was headed for volatile times ahead.