Time To Be Careful: Why Traders Are Cautious On Bitcoin Right Now

Tony "The Bull" Severino

Last Updated: June 11, 2024 2:13 pm

3 mins read

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Bitcoin price is back above $50,000 after a short-lived correction in the range below the key level. However, since the cryptocurrency has reclaimed the halfway point to $100K, open interest has skyrocketed.

The sudden sharp increase in open interest has traders cautious currently. Here’s a closer look at why that’s the case and what could happen as a result.

Open Interest Climbs Alongside Bitcoin As It Surpasses $50,000

Bitcoin is still reeling from the whale-included selloff at $58,000, that sent the cryptocurrency dropping by 20% in just days. The leading cryptocurrency couldn’t sustain above a $1 trillion market cap, despite making it over the milestone temporarily.

Price action is now back above $50,000, but on the way up, the market has added what one pseudonymous crypto trader says is “tons” of open interest.

Open interest has surged since the break back above $50,000 | Source: hyblockcapital.com

According to the trader, this suggests that others have taken long positions on the way up expecting a sizable price increase. An increase in leveraged positions could provide enough fuel for a deeper correction, if long positions are forced to cover amidst a stronger wave of selling.

Markets often take the path of maximum pain, which could result in a cascade of long liquidations on the way further downward.

The Many Reasons Why Crypto Traders Must Proceed With Caution

Bitcoin is in an uptrend, and according to Dow Theory, should be considered in an uptrend until the market says otherwise. But all bull cycles do come to an end, and that finale could arrive at any time.

Traders should currently be cautious of a long squeeze as highlighted above, but technicals are starting to show signs of exhaustion.

Technicals could also point to a larger correction in Bitcoin | Source: BTCUSD on TradingView.com

A TD Sequential TD 9 sell setup on the not-oft-used two-week timeframe has triggered two candles ago. The TD 9 acted as the exact top in 2019, and after appearing in 2017, took exactly two candles before the reversal arrived.

Here it is, another two candles past the TD 9 sell setups appearance, after a red doji, and during the bloodiest month in Bitcoin’s history. The current two-week candle has more than ten days left to go, and if it closes red and below $40,000 per BTC, an evening star bearish pattern will have formed.

An evening star pattern after a TD 9 while the MACD and RSI are at record overbought levels could mean a sizable correction is due. With open interest so high, there are plenty of reasons why traders must proceed with caution.

Featured image from Deposit Photos, Charts from TradingView.com

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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