Bitcoin has fallen to its lowest level in 82 days and is trading near $72,936. It is down 3.5% in 24 hours and 6.2% over the past week. One detail is worrying traders amid the price action: the amount of leveraged money betting on Bitcoin continues to rise even as its price falls.
An Unusual Build-Up Of Leverage
Open interest—the total value of open futures positions—has climbed steadily since early October, even as Bitcoin has trended lower.
That is unusual. When prices fall, leveraged traders are usually forced out, causing open interest to drop. This time, the opposite is happening. When those positions are eventually closed or liquidated, the result could be “a huge volatility event.”
Bitcoin Took The Hot CPI In Stride
Bitcoin’s latest decline came after a hotter-than-expected US inflation report increased the odds of a Fed rate hike in December. Expert Michaël van de Poppe said Bitcoin’s reaction to the report was “fairly good”, but the bigger picture has not changed. Bitcoin remains in a downtrend and needs to reclaim a key price level before turning bullish.
Van de Poppe also sees early signs of life in altcoins, which have begun moving differently from Bitcoin. In his view, that divergence could lead to “a strong surge” in altcoins once Bitcoin finally bottoms.
The Levels Traders Are Watching
Bitcoin has fallen below the $74,000 to $76,000 support zone, which had held for weeks. Attention is now turning to lower levels:
- $71,800: is the next support target, according to analyst Tara, who said it could provide the market with a short-term reset
- $69,000: is what Tara called “THE level to watch”. A successful retest could confirm a trend reversal, though the analyst said the way Bitcoin gets there will matter as much as the level itself
A Short-Term Bounce Is Still Possible
A new bullish divergence is forming on the 12-hour chart. Bitcoin’s price has made a lower low, while momentum, as measured by the RSI, may be making a higher low. This often precedes a short-term bounce.
If the signal is confirmed, the next upside target is $76,500 to $77,000, where a cluster of liquidation orders is building. The last time this signal appeared, in mid-October, Bitcoin had roughly a week of modest relief before falling again.
The Bigger Picture
The outlook on longer timeframes is mixed:
- Long term: The weekly Supertrend indicator remains green, and a bullish divergence that formed in late June and early July remains in play. The last similar signal appeared at the end of the 2022 bear market.
- Medium term: A bearish divergence on the three-day and daily charts remains in place, pointing to weak momentum over the coming weeks
A stronger recovery in US stocks could support Bitcoin. Without one, any bounce may be short-lived.
What To Watch Next
- Whether Bitcoin holds $71,800, and how it reacts if it reaches $69,000
- Whether open interest continues to rise or begins to unwind
- A move toward $76,500 to $77,000 if the short-term bullish divergence is confirmed
Source: coinpedia.org. Adapted by NBTC.
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