BTC Price’s $107K Push Sparks $845M Liquidations – ATH or Crash Next?

With Bitcoin (BTC) price approaching its all-time high of $110,000, the choppy price action has liquidated $845 million in just two days. Spot ETF flows and institutional accumulation show investors are optimistic about BTC’s future and that an ATH retest is possible. However, a closer look at technicals suggests traders must exercise caution in the short term.

BTC Price & Investors Remain Bullish Despite $845M in Liquidations

The May 18 and 19 price action saw BTC price climb to $106.6k, drop to $102k, and revisit a four-month high of $107.1k. As a result of this whipsaw, the cryptocurrency market witnessed a liquidation of $845 million, according to CoinGlass data.

Despite this culling, the Open Interest (OI) remained high at around 199.72k BTC. A look at the OI growth relative to Bitcoin’s price since the second quarter shows how bullish traders are.

Another driver of Bitcoin’s recent push to $107k is the “unexpectedly bullish turn in US trade diplomacy,” adds trading firm QCP Capital.

Providing their insight into crypto’s short-term future, QCP Capital noted that the rebound in cryptos has “outpaced equities, with BTC edging close to all-time highs.”

The trading firm adds, “there is further room for digital assets to rally,” and attributes Coinbase’s inclusion into the S&P 500 on May 19 as a catalyst. 

“History tells us that index inclusion tends to act as a short-term catalyst, as passive managers adjust their allocations to track the benchmark more closely.”

Filings show MetaPlanet and MicroStrategy accumulated 1,004 and 7,390 BTCs, respectively, last week. This is another catalyst that helped push Bitcoin to $107k.

Lastly, the spot Bitcoin ETF inflows have hit 3.3 billion in May, surpassing April’s 2.97 billion netflow, further adding credence to bullish Bitcoin price predictions.

Bitcoin Price Forecast Hints Traders Must Exercise Caution

The fundamentals and on-chain metrics are clearly bullish and forecast a sustained growth for Bitcoin. However, the technicals provide a much more nuanced outlook – futures and options data show the short-term outlook is treacherous with the possibility of an ATH retest and a potential crash.

Bitcoin’s aggregated Implied Volatility (IV) index is at a 10-month low, warning traders to be cautious. This metric averages IVs across multiple timeframes for BTC and evaluates deviations from the mean to determine overextended moves. A high deviation signals expectations are skewed and often leads to price reversals. The data is calculated using Volmex’s Implied Volatility Indices.

The divergence between dropping IV and rallying Bitcoin price signals heightened uncertainty. In BTC’s case, it could be due to potential profit-taking, resistance levels, or fear of corrections. 

Supporting this slightly bearish outlook for Bitcoin price is the Relative Strength Index (RSI) hovering in the overbought zone. Interestingly, RSI has produced lower highs since May 10 while BTC has set up higher highs. This non-conformity is known as bearish divergence and often signals an impending pullback.

While a short-term spike in buying pressure could push Bitcoin price to ATH or even set up a new one at $110,000, it is unlikely that it will sustain there due to the aforementioned warning signals.

Highlighting this short-term uncertainty are CME Open Interest and Annualized Basis, both of which are flat. This outlook suggests that more sophisticated investors do not believe in a sustained breakout of the ATH.

Hence, investors are advised to exercise caution in the short term as Bitcoin’s price could hit a new ATH and still trigger a brutal sell-off. 

Bottom Line

While the fundamentals remain strong, technicals are signaling uncertainty. Data shows smart investors are exercising caution, so a push above the ATH could be temporary. Two reasons for this uncertainty are – Fed’s anticipated rate cut decision amid stagflation concerns and the US President Donald Trump’s tariff pause deadline in July.