Key data shows Bitcoin uptrend is at risk as Bitfinex longs suddenly plunge

Key data shows Bitcoin uptrend is at risk as Bitfinex longs suddenly plunge

Bitcoin has rocketed to a 30-day high after posting one of its largest intraday rallies in weeks, but closer inspection suggests the sudden breakout may not mark the start of an uptrend.

The rally, which began around 9 pm UTC Monday, injected more than $4 billion into market capitalization over five hours and took BTC to just below the $8,000-mark. But as it stands, Bitcoin is yet to clear the highest high of its weeks-long consolidation, made November 29 at $7,933.

Bitcoin proce
BTCUSD 1HR, Bitfinex – TradingView

The rally appears to have catalyzed a shift toward positive sentiment in the crypto market, but not convincingly. The Crypto Fear & Greed Index is up by two points out of a hundred after the rally, from 39 to 41.

Bitfinex longs start to deteriorate

The number of long positions on Bitfinex — a figure that in November hit a historic high — has finally begun to erode. This suggests Bitcoin’s recent uptrend appears to have been a chance for long-holders on the Hong Kong-based exchange to unload their positions and take profit.

Bitfinex BTC Longs
BTCUSD longs, Bitfinex – TradingView

If this trend continues and Bitfinex long-holders exit their positions at this level, short-term sell pressure could be fierce indeed. Nearly $320 million worth of long positions are currently on the Bitfinex order books, skewing the platform overwhelmingly in favor of the bulls (currently longs account for 91.3 percent of all positions on Bitfinex).

Volumes and open interest still not convincing

Hourly volumes on margin trading platforms BitMEX and Bitfinex leaped to their highest since mid-December, however, in terms of gains on higher timeframes, the volumes have been insignificant. This casts doubt on the chances of a continued uptrend. 

Overall volumes in the Bitcoin market are still down about 90 percent from their levels of June 2019, and the volumes driving the latest rally are a fraction of those that marked the start of BTC’s months-long rally from April ($4,000) to June ($13,800) last year. 

BTC volumes
XBTUSD volumes – TradingVIew

Data from the futures markets also suggests the latest rally may not have further legs and that a retracement could be in order. 

Critically, all of the futures trading platforms have seen very little increase in the way of open interest — an indication of new buyers coming into the marketplace. In recent days the Bakkt and CME monthly contracts, as well as the perpetual XBTUSD BitMEX contract, have seen reasonable bounces in volume, but not the double, or triple-digit hikes in open interest percentages one would expect at the start of a strong uptrend.

Like what you see? Subscribe for daily updates.