- Short positions around $27,600 could be at risk of liquidation if Bitcoin breaks $28,000.
- The price increase did not lead to widespread profit-taking, meaning participants were still optimistic about the price action.
Bitcoins [BTC] The surge toward $28,000 has seen many shorts liquidated, according to a recent exposé from Coinglass.
Is your portfolio green? look at the BTC profit calculator
According to the crypto derivatives portal, the week-long Bitcoin liquidation heatmap showed that numerous shorts holding a position of $27,450 have been wiped out of the market.
GM!☕️#BTC liquidation heatmap (1 week)
At 27450 a large number of shorts have been liquidated.
Next, focus on the 26500 and 27660 liquidation levels.https://t.co/Nu9kTJMzy2 pic.twitter.com/OaeSzdQJ1N
— Coinglass (@coinglass_com) October 16, 2023
Liquidation occurs when a position no longer has margin coverage, meaning the trade must be settled via forced closure. On the other hand, the Bitcoin liquidation heatmap is a visual representation of likely liquidation levels based on past price trends.
Longing for a good season
From Coinglass’s post above, it appears that the predicted liquidation point could be around $27,660, and this could happen if BTC breaks $28,000. But what are the chances?
One benchmark that provides insight into a possible projection is that of Bitcoin Open interest, in addition to the price action. Open Interest is defined as the number of long and short positions on a derivatives exchange.
High Open Interest often means strong market participation, which also translates into high liquidity. Another interesting part is that high Open Interest opens the floodgates for greater volatility.
Meanwhile, a low Open Interest indicates low liquidity and reduced market participation.
According to Coinglass, Bitcoin open interest has increased significantly over the past 12 hours. Now that the BTC price is also in an upward trend, there is a good chance of an increase past $28,000 instead of a drop below $27,000.
Source: Coinglass
Interestingly enough, the average derivatives trader shared the same sentiment, as evidenced by the Financing rate. As a measure of market sentiment, funding rates track open short or long positions.
When the funding rate is negative, it means that shorts are paying a funding fee for longs and the average sentiment is bearish. But at 0.01%, Bitcoin’s funding rate is per time referred to that traders were optimistic about the price action.
Source: Santiment
Potential upside for BTC
However, it can be risky to only use statistics related to the futures market when assessing the potential direction of BTC. Therefore, it is also important to evaluate spot market activity. here the Stock exchange Inflow and exchange outflow play a role.
The Exchange Inflow measures the amount of BTC sent to exchanges from external wallets. On the other hand, Exchange Outflow is the amount of BTC sent from exchanges to non-exchange addresses.
Read Bitcoins [BTC] Price prediction 2023-2024
At the time of writing, Bitcoin inflows on the exchange were 2360, while outflows were 2412. Although this was a small difference, the measure revealed that there has been less profit taking in the market despite the price increase.
Source: Santiment
Just like the Open Interest signals, BTC has more upside opportunities than a downtrend. However, this will only be possible if there is no enormous selling pressure and interest in the market remains high.