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Bitcoin [BTC] investors should take this into consideration before going long

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Bitcoin [BTC] The bulls are finally charging after what seemed like the longest wait. volatilityin contrast to the results of recent weeks.


Click here for AMBCrypto Bitcoin (BTC) price prediction 2022-23


Bitcoin’s midweek rebound may drive many traders to buybacks bull actionOne of the reasons for the recent rally could be a double-edged sword that investors should also be wary of. Low volumes and unfavorable market conditions fueled a bearish outlook, with many investors expecting further declines.

Leveraged short liquidations cause more selling pressure

A week ago, we saw higher demand in the derivatives market than in the cash market. One potential reason for this was the higher leverage position. Most of the leveraged positions were sold short as most traders expected further declines. As a result, Bitcoin’s rally over the past two days has resulted in a serious liquidation of leveraged short positions.

Source: Messari

At the time of writing, over 16,000 leveraged short positions have been liquidated in the last 24 hours. Interestingly, Bitcoin funding rates declined over the same period, suggesting that most of the Bitcoin demand was for short positions. Hence the decline when the price starts to rise.

The same indicator revealed a decline in the liquidation of leveraged shorts, confirming that traders were letting go of their positions. Despite the liquidation, Bitcoin’s estimated leverage ratio remains high. Confirmation that investors are now switching to long trades.

BTC estimated leverage ratio

Source: CryptoQuant

The switch to leveraged longs underscores the same reason the market saw midweek volatility rise. Highly leveraged positions are more sensitive to price. Movements contrary to the expected direction lead to mass liquidations.

A look at bitcoin spot demand also reveals that whales are accumulating, but demand is still low. did.

BTC demand

Source: Glassnode

However, despite this rise, the Purpose Bitcoin ETF, one of the most important institutional metrics, did not register much of a rise. This, combined with relatively low demand by whales, suggests that the recent uptick is likely to be limited.

Bitcoin price movement?

Once investors start making profits, bitcoin will soon be for sale. Bitcoin was trading at $20,909 at the time of writing after he rose 8% in the last 24 hours.

Bitcoin price movement

Source: Trading View

Earlier in the week, we highlighted a possible breakout or breakout from the wedge pattern. The result favored the bulls, but the price is now approaching the overbought zone. This means that selling pressure may return, but it could be above the $22,000s.

Conclusion

bitcoin investor Given that the market is characterized by low institutional and whale demand, we must proceed with caution. A high leverage ratio can make Bitcoin more sensitive to selling pressure.

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