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Bitcoin‘s surge past the $44,000 mark on December 21 instilled optimism in the crypto community and signaled a potential revival for the flagship cryptocurrency. This increase was a beacon of hope, especially considering Bitcoin’s relatively stagnant performance recently. However, following the rise, warnings have started to emerge.
Alarm Bells: Investors Called to Exercise Caution
Amidst the excitement, cautionary voices are emerging, urging investors to be careful despite the price increase. According to Greatest_Trader, a contributor to CryptoQuant, Bitcoin’s recent price movement has triggered an increase in long positions, as indicated by the positive funding rate.
A positive funding rate indicates a prevalence of long positions in the market and reflects a bullish outlook. Greatest_Trader pointed out that this trend could lead to an increase in long-focused liquidations but also revealed the potential for a scenario where a rapid sell-off could significantly impact the market.
Liquidation Risk: Identifying Critical Levels
To measure potential liquidation points, the Liquidation Levels indicator by HyblockCapital, which defines the price positions at which a trader’s position could be wiped out, showed notable developments.
The chart revealed a liquidity cluster between $44,900 and $45,870. In this region, investors using high leverage face a high risk of liquidation that could trigger a reversal in Bitcoin’s price.
Bear Signals: Cumulative Liquidation Levels Delta (CLLD) and Open Interest
The Cumulative Liquidation Levels Delta (CLLD) also contributed to the bearish narrative, with a positive reading indicating a potential full retracement that could push Bitcoin below $43,000. Analyzing open interest data from Coinglass, it was observed that despite a decline in Bitcoin’s value on December 18, open interest increased, suggesting an increase in downward momentum.
As Bitcoin strives to reclaim the $44,000 threshold, evaluating potential price movements becomes increasingly important. The rising open interest, combined with the failure to surpass $44,000, heightens concerns of a potential drop to $42,000. Investors are advised to closely follow the market dynamics in the coming days. Bitcoin is trading at $44,077 as of writing this article.
