This Overlooked Factor Suggests Bitcoin May Soon See an Insane Crash

Bitcoin and the aggregated crypto markets are currently entering a bout of sideways trading that comes just days after the massive rally that sent BTC to highs of $9,500 occurred.

The market structure that has developed as a result of the consistent gains seen by Bitcoin throughout 2020 highly favors bulls and has led many analysts to believe that the crypto could soon see significantly further upwards momentum.

In spite of this widespread optimism, there is one largely overlooked factor that could spell trouble for where Bitcoin trends next.

Bitcoin Begins Consolidating as Open Interest Balloons

At the time of writing, Bitcoin is trading up marginally at its current price of $9,350, which marks a slight decline from its recent highs of $9,500 that were set at the peak of the recent rally.

It is important to note that although BTC is currently trading down slightly from its recently established 2020 highs, the crypto has been able to maintain above its previous year-to-date highs of $9,250 over the past 48 hours.

Holding above this level is certainly a bullish sign, and it does appear that traders are anticipating the markets to see further volatility in the near-term, which is elucidated while looking at BTC’s rapidly growing open interest.

“Mex OI at $1B,” Hsaka – a popular cryptocurrency analyst on Twitter – said while referencing the Bitmex OI chart seen below.

Open interest refers to the amount of outstanding unsettled positions on a specific asset, with rapid climbs in OI typically being associated with traders anticipating intense volatility.

Could BTC’s OI Signal That Massive Losses Are Inbound? 

Historically, massive growth in Bitcoin’s open interest has not been a bull-favoring event, with the majority of OI growth to over $1 billion resulting in major selloffs for Bitcoin.

Jacob Canfield, another prominent cryptocurrency analyst on Twitter, spoke about this in a tweet from earlier this week, telling his followers that movements past the $1 billion threshold have historically been followed by big selloffs.

“Open interest on #bitcoin is currently at $943 million. Every time we’ve hit $1 billion we’ve seen a pretty big sell off. Let’s see if this time will be different,” he explained.

It is still too early to tell whether or not Bitcoin’s massive climb in OI will be the catalyst that sparks the next selloff, but it is one factor that should be closely watched by investors in the near-term as it may have a notable impact on BTC’s price action.

Featured image from Shutterstock.

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Source: Newsbtc