Key Points
- Bitcoin saw high trading volume in the derivatives markets, but not in the spot markets.
- The build-up of liquidation levels at $100k and lower could pull prices lower.
Bitcoin recently achieved an all-time high of $111,980 on Binance on the 22nd of May. The Open Interest (OI) also reached a record-breaking $74 billion. The increased capital inflow into the derivatives market indicates a bullish sentiment.
However, there has been a significant accumulation of liquidations below the $100k mark. This could potentially draw the price downwards, as prices are generally attracted to liquidity. Is a short-term pullback on the horizon?
Data Trends and Market Predictions
Data from Coinalyze reveals that the OI trend has leveled off after Bitcoin (BTC) reached a new all-time high. The Funding Rate was strongly positive, but it has recently dropped to neutral levels.
A post on CryptoQuant Insights by user Darkfost highlighted that the demand in the spot market is decreasing. The futures trading volume remains robust, indicating a high level of speculative interest. However, the decline in spot volume as Bitcoin enters its price discovery phase is concerning.
The diminished spot demand suggests that investors are hesitant about purchasing BTC above the $94k-$96k range. This range served as a resistance point earlier in May before the price nearly reached the $112k mark.
The Potential Impact of Market Trends
A rally led by the derivatives market could potentially lead to increased volatility and deeper pullbacks. Looking at Bitcoin’s price action over the past six months, a possible range formation is apparent. There are two potential scenarios in the coming weeks – a sustained uptrend, or a reset to $100k or even $93k.
When ranges form, price action within the range often leads to the accumulation of liquidation levels around the extremes of the range. After the retracement to $77.5k in March and the subsequent recovery, short liquidations accumulated at $99.6k, $108k, and $113k.
The first two levels have been swept. The declining spot demand suggests a market reset might be imminent, and $113k might be unattainable for the time being.
The 3-month chart highlights the accumulation of liquidation levels at $100k and $92k as the next potential targets. Depending on profit-taking activities and whether the bulls regain their footing, Bitcoin could potentially drop to $106k again.
