Analyst: Bitcoin will “punish” late longs as bulls grow over-leveraged

Analyst: Bitcoin will “punish” late longs as bulls grow over-leveraged

It’s been a whirlwind of a year for Bitcoin, with the cryptocurrency incurring a significant amount of bullish momentum in the early part of January when buyers pushed BTC’s price from lows of $6,800 all the way to highs of just under $10,000.

It does appear that bulls are beginning to get a bit cocky, however, and this may be just what bears need to spark the next notable selloff.

One prominent cryptocurrency analyst is now noting that long positions that are late to the party may soon be punished, as a multitude of different factors seems to suggest that there could soon be a major long squeeze that leads to some significant short-term downside.

Bitcoin continues pushing towards $10,000 as bulls maintain control over the crypto

At the time of writing, Bitcoin is trading up just under two percent at its current price of $9,770, which marks a massive climb from daily lows of roughly $9,300 that were set yesterday.

Bitcoin is now just a stone’s throw away from breaching into the highly coveted five-figure price region, which remains an important psychological price level. BTC’s reaction to this level could offer valuable insight into just how fundamentally significant the 2020 rally has truly been.

Cantering Clark, a prominent cryptocurrency analyst, explained that he believes the crypto’s buyers may be greatly overleveraged at the moment, which is elucidated while looking at the crypto’s funding rate, open interest, and futs premium.

“I think the market is likely due to punish late longs soon. Market is likely very long right now, as it should be, with the trend. OI very high (with trend though). Futs premium +400. 25D Skew chart -> Sentiment – ST & LT very confident.”

Bitcoin BTC
Image Courtesy of Cantering Clark

How far reaching could this next BTC selloff be?

As for how significant this long squeeze will be, Clark further goes on to explain that he believes Bitcoin will essentially “fall under its own weight,” leading to a $700 to $1,000 move that creates a significant amount of liquidations.

“It’s not like anyone is getting very aggressive lately. We haven’t seen any major divergences in delta overall toward this recent high. If anything, I suspect a roll over / fall under own weight i.e. Cascade of stops and liquidations. A nice 700 – 1k move.”

If this type of movement does occur, it is highly probable that it will be catalyzed by a sharp upward movement that leads to an intense rejection.

Bitcoin | BTC

Updated: Feb 7 at 12:17 am UTC

Bitcoin, currently ranked #1 by market cap, is up 1.57% over the past 24 hours. BTC has a market cap of $177.51B with a 24 hour volume of $37.47B.

Chart by CryptoCompare

Bitcoin is up 1.57% over the past 24 hours.

Posted In: , Analysis, Price Watch
Invest with AMFEIX

Like what you see? Subscribe to CryptoSlate

Get our daily newsletter containing the top blockchain stories and crypto analysis straight to your inbox.

Sign up to stay informed
Cole Petersen

Cole Petersen

Journalist @ CryptoSlate

Cole is a freelance journalist and university student studying philosophy. He focuses primarily on covering cryptocurrency and blockchain-related news. He owns a non-life-changing sum of Bitcoin and enjoys day trading.

View author profile

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.