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Highlights
- Open Interest in Bitcoin futures has surged to $34 billion, signaling increased market participation, though the rising leverage ratio of 0.21 indicates potential risk.
- The MVRV ratio stands at 5.8%, indicating the risk of profit realization by short-term holders to bolster bearish reversal.
- A bullish crossover between the 20-and-50-day EMA accelerates the near-term bullish sentiment in the crypto market.
A 4-day Bitcoin price rally has sparked a renewed recovery sentiment in the cryptocurrency market. The recent BTC jump from $57630 to $64000— an 11.3% increase— is largely driven by speculation around the Fed rate cut, now reduced to 475-500 basis points (BPS). While the positive sentiment promotes a prolonged bull run, the on-chain and derivatives market data suggest a cautious outlook for the coming week.
Key Warning Signs for Bitcoin Bulls Heading into Next Week
By press time, the Bitcoin price had traded at $63,169 while boosting a market cap of $1.24 trillion. The broader market bullish sentiment can be attributed to the recent 0.5% interest rate cut decision during last Wednesday’s FOMC meeting. While the Bitcoin price sustains above the $60,000 line, the derivative market data shows a sudden spike in future open interest to $34 billion, according to Coinglass data.
The rising OI value typically shares a position outlook as more traders enter the market by opening new positions. However, the risk-taking behavior among traders, even after a notable price rally, could spike market volatility and bolster a minor retracement.
Moreover, the Bitcoin estimated leverage ratio has hit a new yearly high of 0.21, according to Cryptoquant data. The surge in the estimated leverage ratio indicates that traders are taking on more debt to finance their Bitcoin purchases. In such a high-leverage environment, even a minor pullback in Bitcoin price could trigger the liquidations of aggressive buyers and accelerate the selling pressure for a deeper correction.
Furthermore, the 30-day Bitcoin Market Value to Realized Value (MVRV) ratio currently stands at 5.8%, indicating that short-term BTC buyers are realizing profits. While this elevated MVRV level suggests positive Bitcoin sentiment, it also signals potential profit-taking behavior. Historically, when the MVRV ratio spikes into the 6-10% range, it often precedes a bearish reversal and forms a local BTC top.
BTC Price 3% Away From Major Breakout
In the last two weeks, the Bitcoin price prediction showed a V-shaped recovery from $52546 to $63000, accounting for 19.85% growth. With sustained buying, the coin price is just 3.4% away from challenging the weekly resistance at $65000.
The technical indicator shows a bullish outlook as the momentum indicator RSI climbed above the 60% mark. Therefore, if buyers flip overhead resistance into potential support, the BTC price could surge to all-time-high resistance of $73,750.
Alternatively, if the failed $65000 breakout, the ongoing consolidation could extend into quarter 4.
Frequently Asked Questions (FAQs)
1. Why should Bitcoin bulls be cautious next week?
2. How does the leverage ratio impact Bitcoin's market?
3. What does the rising open interest indicate for Bitcoin?
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