Traders are usually taking large bets on future market directions when open interest is this high. Still, the ramifications can change based on the mood of the market. A bullish slant to the market may indicate that traders are getting ready for a price breakout. However, if sentiment turns more cautious, this spike might trigger a sharp sell-off if prices do not live up to expectations, which could lead to a possible long-term retracement.
Several price levels are important to keep an eye on, especially considering the current state of the market where Bitcoin is trading at about $63,500. Initially Bitcoin is facing immediate resistance at the $64,000 level, which it recently tested. If trading volume continues to support the upward move, a break above this level may spark a stronger rally. The amount of $62,000 serves as vital support and is the second most important level.
If Bitcoin is unable to sustain this level, traders may sell off their long holdings, sending the price of the cryptocurrency into a downward spiral. The main support level below $62,000 is $60,500, to sum up. A collapse in this area might trigger steeper drops, which could force BTC into a longer retracement. Additionally, the increase in open interest suggests that there might be a lot of leveraged positions.
If the market moves sharply against these positions, there is an increased risk of liquidation cascades, which further increases market volatility. Traders should be mindful of this situation because it has the potential to cause sudden quick moves in either direction. In conclusion, the increase in Bitcoin open interest indicates that a big move in the market is imminent. To predict the next possible movements for Bitcoin, traders should be wary of the $64,000 resistance and keep an eye on the $62,000 and $60,500 support levels.
This article was originally published on U.Today
Source: Cryptocurrency - investing.com
