- Bitcoin’s derivative volumes turned positive after two days of dominant selling pressure in the market
- Market analysis revealed Bitcoin faces one more major obstacle before it can rally back to its previous ATH
Bitcoin [BTC] made significant gains over the past 24 hours, with the crypto climbing by 0.85% to hit $106k after dropping to $103k – Its lowest level of the week.
Given the recent developments in the derivatives market, analysts believe Bitcoin may have the potential to stage a strong rally this week. In fact, AMBCrypto’s analysis covered the key factors that could influence this movement.
Open interest spikes by $400M — Bullish momentum or trap?
Bitcoin’s buying volume has regained some semblance of dominance, according to the Taker Buy/Sell Ratio on CryptoQuant.
For the first time since 17 April, the ratio recently climbed above 1 – A sign of renewed confidence among traders who are placing long positions in anticipation of further gains.
Source: Cryptoquant
This uptick in buying has been accompanied by a surge in Bitcoin’s Open Interest.
Open Interest, which reflects the total value of unsettled derivative contracts in the market, rose from $33.3 billion to $33.7 billion.
A $400 million hike implies that more contracts have been opened in recent days. The uptick in Open Interest, alongside the appreciation in price, could mean that these new contracts are mostly from buyers.
Source: Cryptoquant
Caution – Is a correction on the horizon?
However, there’s a catch. While the hike in Open Interest has contributed to Bitcoin’s recent price gains, it also carries the risk of a sharp pullback.
In fact, Bitcoin’s Open Interest chart revealed that previous declines of 20%–25% have led to price drops of between 7%–21%, pushing the asset into corrective phases.
This means that Bitcoin may be nearing such a phase. At the time of writing, Bitcoin had gained by just 1.96%, and any sudden drawdown could pull the asset down by as much as 20%.
Source: Cryptoquant
Analysis of spot market trading activity hinted at a general consensus between spot and derivative traders. In fact, total spot market purchases this week amounted to $629 million worth of Bitcoin.
This buying pressure from spot traders has likely helped prevent the asset from falling below the $100,000-level this week.
If this trend of sustained buying persists through the weekend, it could inspire more long positions in the derivatives market – Further strengthening Bitcoin’s chances of a rally.
Inflow hits low, can Bitcoin eye $112k?
An analysis of Bitcoin exchange inflows—which track how much BTC investors are depositing onto exchanges—revealed a major decline.
Figures for the same indicated that after steadily falling from its previous high this week, inflow levels have now hit their lowest point of the year.
Source: Cryptoquant
Such a sharp decline could also mean that investors are choosing to hold their Bitcoin, rather than preparing to sell. Such behavior usually implies a long-term bullish outlook.
Analysis of Bitcoin’s 1-day chart supported the idea of an imminent rally – Hinting at a strong move to the upside.
At the time of writing, Bitcoin was trading within a symmetrical triangle—A typical precursor to a breakout. On the price chart, BTC seemed to be approaching the key resistance level at $106,141 too.
Source: TradingView
A successful breakout past this level would imply that the next major resistance lies at the upper boundary of the triangle pattern.
If Bitcoin climbs past that level, it would likely reclaim its all-time high of $112,000.
