Key Points
- Bitcoin’s Open Interest (OI) heatmap shows a pattern of longs getting trapped repeatedly.
- There are indications of a potential short squeeze that could push Bitcoin past $99K.
Bitcoin’s Open Interest (OI) heatmap has been exhibiting a distinct pattern over the past month, with longs frequently finding themselves in a trap. The pattern involves buyers stepping in, Open Interest spiking, and then prices reversing, leaving the buyers stuck.
Bitcoin’s Struggle with Open Interest
A month ago, Bitcoin was trading around $106K, but it has now fallen to $95,415, marking its second consecutive cycle in this loop. The 105K-106K range saw a surge in Open Interest as traders piled in, resulting in over $68 billion in open positions. This marked the highest accumulation of OI. However, when Bitcoin revisited this “breakeven” zone, longs doubled down, only to get trapped as weak hands exited the cycle.
In addition, futures traders increased high-risk leverage as Bitcoin hit a top, causing the leverage ratio to spike. This further trapped longs and triggered more liquidations, turning the price range into a difficult resistance zone.
Potential for a Breakout?
Recently, the 95K-98K range saw a significant surge in OI, surpassing $60 billion. However, this time, it acted as support, trapping shorts as Bitcoin broke past $98K. The crucial question now is whether this pattern will repeat itself.
Could a short squeeze potentially push Bitcoin past $99K, targeting $100K, before the futures market overheats due to overleverage? With 52% of positions short and OI up by 1.50%, the market is set for a powerful squeeze, potentially trapping shorts and flipping the $99K-$100K range into a local bottom.
However, a decrease in OI could be bullish, enabling Bitcoin to break past key resistance levels. If this doesn’t happen, the cycle of trapping longs at every top could keep Bitcoin stuck in its current loop. The upcoming days will be crucial in determining the direction Bitcoin will take.