Bitcoin has seen some immense volatility throughout the past several days and weeks, with its multiple bids to break through the $10,000 region all proving to be unsuccessful as it continues hovering within the $9,000 region.
The price action seen in the time following Bitcoin’s initial break above $10,000 a few weeks ago can largely be characterized as consolidation, as it has failed to garner any decisive trend in either direction.
Until it sets fresh highs above $10,000, or lows beneath $8,100, it will be difficult to determine where it will trend in the mid-term.
It does appear that traders are anticipating Bitcoin to see some major volatility, however, as open interest on BitMEX has rebounded following a sharp decline seen yesterday.
This decline was largely the result of a widespread liquidations caused by BTC’s rejection at $10,000.
Bitcoin Forms Fresh Range as Traders Prepare for Major Volatility
Bitcoin could be in the process of forming a fresh trading range following the volatility seen yesterday evening.
This latest movement came about as bulls attempted to test the coveted five-figure price region, but they were stopped short after BTC was rejected at $9,900.
One popular analyst explained that he believes Bitcoin could still be positioned to climb higher as long as it trades above $9,550, but it is possible that its recent highs will mark a local top.
“BTC: There’s the breakdown and bounce in low $9ks. Nice wick, watching for a close back above $9550. If not, then likely a sign that this was a local top,” he noted.
The lower boundary of this potential trading range does seem to sit around $9,500, with an upper boundary at just under $10,000.
Active traders don’t seem to think that this potential range-bound trading will last for long, as data from research platform Skew shows that open interest on BitMEX has rocketed higher following a sharp overnight decline.
Image Courtesy of Skew
As seen on the above chart, BTC’s open interest has risen by over $40 million throughout the past 12 hours.
Recent Volatility Sparks Mass Liquidations Amongst Traders
This recent decline in open interest appears to have come about as a result of a liquidation spree caused by Bitcoin’s recent rejection at $9,900.
According to Skew, over $30 million in positions were liquidated yesterday as a result of this recent turbulence.
Image Courtesy of Skew
Bitcoin pushed higher before facing the harsh rejection, which in turn caused traders using high leverage on both sides to be liquidated.
The presence of high-leverage positions can prove to be negative for the market, as it makes digital assets like Bitcoin more prone to seeing large and unsustainable movements.
Because these positions were largely flushed out, BTC may now be able to start seeing another steady ascent higher.
Featured image from Unplash.
