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Bitcoin is likely on the verge of heightened volatility due to the combination of leverage, retail speculation, and aggressive spot selling.
Popular crypto analyst Ted recently took note of several rather alarming derivatives market indicators.
Bitcoin has been printing a series of lower highs and lower lows on its one-hour chart. Recently, the cryptocurrency dropped below the $75,000 level.
Aggregated open interest has sharply rebounded back toward 268,600 coins. It has a major influx of new futures positions.
The eight-hour weighted funding rate average has surged to a highly positive 0.0085%. This proves that the overwhelming majority of these new leveraged positions are long bets.
In the meantime, the Coinbase Premium Index has plunged deep into negative territory (-0.189).
American retail and institutional spot traders on Coinbase are selling or shorting. This keeps dragging down spot prices while offshore derivatives exchanges continue to pile into levered long positions.
Open Interest and funding rates spike alongside a deeply negative Coinbase premium, which potentially could lead to a "long squeeze" setup.
Longs have to pay a heavy premium to maintain their positions on declining prices. This could result in a cascading liquidation flush.
A mystery bid
In the meantime, there has been a massive wave of capital flight from U.S. spot Bitcoin ETFs. Institutional spot ETF outflows are currently running at a staggering negative $700 million per day.
With that being said, the market appears to be eerily resilient.
Despite the identical $700 million daily hemorrhage leaving Wall Street products, Bitcoin's price is firmly holding its ground above $75,000.
"This time, the price is holding," the Bitfinex exchange noted. "An unidentified bid is absorbing it."
Over the past 24 hours, the cryptocurrency market has seen liquidations totaling a staggering $295 million. Long positions accounted for a massive $248 million of the total, which perfectly illustrates the current predicament of bullish traders.
Dan Burgin
