Bitcoin price is back above $50,000 after a short-lived correction in the range below the key level. However, since the cryptocurrency has reclaimed the halfway point to $100K, open interest has skyrocketed.
The sudden sharp increase in open interest has traders cautious currently. Here’s a closer look at why that’s the case and what could happen as a result.
Open Interest Climbs Alongside Bitcoin As It Surpasses $50,000
Bitcoin is still reeling from the whale-included selloff at $58,000, that sent the cryptocurrency dropping by 20% in just days. The leading cryptocurrency couldn’t sustain above a $1 trillion market cap, despite making it over the milestone temporarily.
Related Reading | Bid Side In Bitcoin Disappears Amidst Jittering “Macro Environment”
Price action is now back above $50,000, but on the way up, the market has added what one pseudonymous crypto trader says is “tons” of open interest.
Open interest has surged since the break back above $50,000 | Source: hyblockcapital.com
According to the trader, this suggests that others have taken long positions on the way up expecting a sizable price increase. An increase in leveraged positions could provide enough fuel for a deeper correction, if long positions are forced to cover amidst a stronger wave of selling.
Markets often take the path of maximum pain, which could result in a cascade of long liquidations on the way further downward.
The Many Reasons Why Crypto Traders Must Proceed With Caution
Bitcoin is in an uptrend, and according to Dow Theory, should be considered in an uptrend until the market says otherwise. But all bull cycles do come to an end, and that finale could arrive at any time.
Traders should currently be cautious of a long squeeze as highlighted above, but technicals are starting to show signs of exhaustion.
Technicals could also point to