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Traders are Using the Most Leverage Ever as Bitcoin Nears Key Resistance

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  • Bitcoin is trading around the level it has been at for the past couple of weeks
  • Bulls are vying to break above $13,800, but the resistance here is rather significant and is showing few signs of degrading
  • BTC has now made multiple bids to break above $14,000, but each one has resulted in it seeing strong inflows of selling pressure that send it back down to the mid-$13,000 region
  • There’s a good chance that Bitcoin will begin seeing heightened volatility in the near-term, as the leverage being used by traders on margin platforms like Binance is at an all-time high

Bitcoin and the aggregated cryptocurrency market have not been able to post any clear breakouts or breakdowns throughout the past few days and weeks.

It is still trading just below its crucial $13,800 resistance level, which is a level that analysts and investors alike have been closely watching throughout the past few days and weeks.

If this level isn’t broken above in the near-term, it could eventually catalyze a strong rejection that sends its price reeling lower.

One trend that could contribute to the volatility stemming from a breakout or a breakdown is the massive leverage being used on trading platforms like Binance.

Bitcoin Continues Seeing Stagnating Price Action as Bulls Target $13,800 Breakout

Yesterday evening was quite volatile for Bitcoin, with the cryptocurrency rallying as high as $14,100 before facing inflows of selling pressure that sent it down to $13,700.

It has been consolidating ever since and is currently trading down just under 2% at its current price of $13,786.

This is just a hair below its key $13,800 resistance level that has been holding strong for the past few days and weeks.

Traders Up the Leverage as Volatility Looms

One analytics firm noted in a recent tweet that Bitcoin traders on margin trading platforms like Binance Futures have been greatly increasing the leverage they are using.

“BTC Estimated Leverage Ratio at Binance hits the all-time high,” CryptoQuant noted.

Image Courtesy of CryptoQuant.

This trend suggests that, once Bitcoin makes a big movement, the volatility seen will be heightened and potentially set the tone for where it will trend throughout the rest of 2020.

It could also spark a liquidation cascade that fuels either a strong downtrend or uptrend – depending on how it reacts to $13,800.

Featured image from Unsplash.
BTCUSD pricing data from TradingView.





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Bitcoin

3 things traders are saying about Bitcoin and the state of the bull market

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Bitcoin’s (BTC) dip below $29,000 on June 22 rocked the markets a handful of analysts to call for a potential drop below $20,000. 

Many traders on crypto Twitter were focused on the formation of a death cross on the Bitcoin chart as an omen for another potential drop in the price but analysts with a more contrarian point of view look at this chart pattern as a signal that it is time to buy the dip. 

Three reasons why some traders still see a bull case for Bitcoin include the appearance of the “spring” stage of the Wyckoff accumulation model, steady buying by long-term holders and the formation of a bear trap at the golden ratio that is similar to moves seen during previous bull runs.

The Wyckoff model says spring has arrived

The Wyckoff accumulation model has been all the rage amongst cryptocurrency analysts over the past month as the price action for Bitcoin has been tracking the pattern relatively closely since the May 19 sell-off.

As seen in the tweet above, Bitcoin’s plunge below $29,000 and the subsequent recovery above $32,000 has some analysts suggesting that the “spring test” seen in phase C of the Wyckoff pattern has been fulfilled. This would indicate that the bottom is in for the current correction and now begins the choppy climb higher.

If this turns out to be true, BTC would enter phase D, also known as the “markup phase” where a new uptrend is established and “pullbacks to new support offer buying opportunities” that are often seen as opportunities to buy the dip.

Related: Bitcoin drops below $36K as century-old financial model predicts big BTC crash

In phase D a breakout to new highs is expected as the cycle completes and prepares to potentially begin again once the move higher is exhausted.

Long term holders are still bullish

Another bullish sign cited by analysts is the steady accumulation by long-term holders.

The Bitcoin long-term net holder position shows that investors actually began to reaccumulate back in late April and they began to significantly increase their activity in May as the price fell into the $30,000 to $40,000. On-chain data shows that these investors have continued to buy into the most recent dip.

This activity suggests that more experienced crypto traders are familiar with Bitcoin’s market cycles and view the current range as a good level to open long positions when fear is high and the sentiment is low. 

The biggest rewards go to those who take the risk to buy an asset amid plunging prices and sentiment, and these are the types of situations where the contrarian traders thriv.

A bear trap lurks at the golden ratio

The third scenario some analysts are focusing on suggests that the current price movements have set up a bear trap that echoes a move seen during the last cycle which involves a pullback to the 1.618 golden ratio extension level which will then be followed by a breakout to new highs.

From this perspective, the market is currently in the awareness phase of the four psychological stages of asset bubbles. After the bear trap occurs, Bitcoin will enter the mania phase where widespread media coverage attracts the attention of new market participants who then chase the price to ever-increasing heights “based on the delusion that the asset will keep going up, forever.”

Previous calls for the possibility of Bitcoin reaching a price of $200,000 by the third or fourth quarter of 2021 by veteran trader Peter Brandt, who was far from alone in predicting its value to surpass the $100,000 mark this year, would suggest that the long-expected blow-off top is yet to come.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.