Market Direction

Is Bitcoin’s wild ride overbought and overboard?

Updated: Aug 31, 2024

Published: Dec 5, 2023

Is BTC looking slightly exhausted to the upside?

Indicators suggest Bitcoin is majorly overbought here on the larger timeframes.

Also, Open Interest hit highs not seen since November 2021 (BTC's last all-time high).

TLDR

Bitcoin surged to $42,000, but there are now signs that it is overbought.
Open Interest reaches levels not seen since November 2021.
Market indicators suggest a potential pullback amid excessive retail participation.
We advise caution, and our eyes are on $38,000 - $38,300 for a possible consolidation.

Disclaimer: Not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results. “One Glance” by Cryptonary sometimes uses the RR trading tool to help you quickly understand our analysis. They are not signals, and they are not financial advice.

Macro analysis

Today, we have the release of the JOLT’s Job Openings data. The consensus is for the number to come in 200k less than last month’s reading. If the number comes in at consensus or above, markets will likely take this positively.
As we expected, the Dollar Index has begun to get more of a bid, while the S&P and Nasdaq seemingly begin to struggle at their highs. This looks as if risk assets may be due for a pullback.

Technical analysis

Price action-wise, BTC had a fantastic day yesterday, from $40,000 to $42,000.
BTC has now moved well into overbought territory on the major timeframes.
$42,300 is a local resistance level, which BTC has initially found resistance at.
The major support is at $38,000 to $38,300.

Market mechanics

The Open Interest has increased to $18.66b but is now down to $18.29b today. This is the highest level of Open Interest since November 2021 (bar an odd day in April 2022).
The OI-Weighted Funding Rate has reset to 0.012%, which is a far healthier level than the 0.040% we saw yesterday morning.
Today, we have seen over $10m of Long liquidations despite just having a 1% move to the downside. This emphasises the excessive amount of retail Longs that had built up yesterday and that have now closed today. Too many participants seemed to chase the move higher, which we saw in the extremely positive Long/Short Ratio.
The Long/Short Ratio is now back to healthier levels again at 0.9861.

Cryptonary’s take

Bitcoin is difficult to call here today; having smashed through most resistances with relative ease over the past month, we’re now looking at trading indicators suggesting that Bitcoin is overbought here.

Additionally, Open Interest is at yearly highs, with retail participants piling in yesterday; we saw such a positive Long/Short ratio. These have now been somewhat partially shaken out on just a 1% movement down in price. Ultimately, it’s hard to call Bitcoin’s next movements here. But we think Open Interest does have to pull back slightly as there is an excess of leverage in the system at the moment.

We therefore think it’s possible that Bitcoin pulls back further and consolidates. The area we have a keen eye on in the short term is the $38,000 - $38,300 level. We would be very light DCA buyers of BTC at this price point if the market gives it to us.

In terms of short-term trades, we’re not phenomenally confident in the short-term direction; therefore, we’re steering clear of these types of trades for now.