Bitcoin
Bitcoin’s hike brings shorts nothing but pain: What now?
With increasing interest in the market and thriving bullish sentiment, more shorts could be liquidated. However, this would also depend on the actions of spot traders.
- Short positions around $27,600 could be at risk of liquidation if Bitcoin breaks $28,000.
- The price increase has not led to widespread profit-taking, meaning participants were still bullish on the price action.
Bitcoin’s [BTC] rise in the $28,000 direction has left a lot of shorts liquidated, according to a recent revelation by Coinglass.
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According to the crypto derivatives portal, the one-week Bitcoin liquidation heatmap showed that numerous shorts holding the $27,450 position have been wiped out of the market.
GM!☕️#BTC liquidation heatmap (1 week)
At 27450, a large number of shorts have been liquidated.
Next focus on the liquidation levels of 26500 and 27660.https://t.co/Nu9kTJMzy2
pic.twitter.com/OaeSzdQJ1N— CoinGlass (@coinglass_com) October 16, 2023
Liquidation occurs when a position has run out of margin cover, meaning that the trade has to be settled through forced closing. On the other hand, the Bitcoin liquidation heatmap is a visual representation of likely liquidation levels based on previous price trends.
Longs season to thrive
From Coinglass’ post above, the predicted liquidation point could be around $27,660, and this may happen if BTC breaks $28,000. But what are the chances?
One metric that provides insight into a possible projection is Bitcoin’s Open Interest, alongside the price action. Open Interest is defined as the amount of long and short positions on a derivatives exchange.
High Open Interest often means strong participation in the market, which also translates to high liquidity. Another interesting part is that a high Open Interest opens the floodgates for increased volatility.
Meanwhile, low Open Interest signals low liquidity and reduced participation in the market.
According to Coinglass, Bitcoin’s Open Interest has significantly increased within the last 12 hours. With the BTC price also on an uptrend, there’s a likelihood of a rise beyond $28,000 rather than a fall below $27,000.
Source: Coinglass
Interestingly, the average derivatives trader also shared the same sentiment, as indicated by the Funding Rate. As a measure of market sentiment, funding rates track open short or long positions.
When the Funding Rate is negative, it means shorts are paying longs a funding fee and the average sentiment is bearish. But at 0.01%., Bitcoin’s press time Funding Rate meant that traders were bullish on the price action.
Source: Santiment
Potential upside for BTC
However, using only metrics linked to the Futures market in assessing the potential BTC direction could be risky. Therefore, it is also important to evaluate spot market activity. Here, the Exchange Inflow and Exchange Outflow come into play.
The Exchange Inflow measures the number of BTC sent from external wallets into exchanges. On the other hand, the Exchange Outflow is the number of BTC sent from exchanges to non-exchange addresses.
Read Bitcoin’s [BTC] Price Prediction 2023-2024
At press time, Bitcoin’s Exchange Inflow was 2360 while the outflow was 2412. Although this was a small difference, the metric revealed that there has been less profit-taking in the market despite the price rise.
Source: Santiment
Like the signals from the Open Interest, BTC has more uptick chances than a downtrend. However, this will only be possible if massive selling pressure doesn’t appear, and high interest in the market remains.
