Traders who have leveraged positions in Bitcoin (BTC) may face an unpleasant surprise as the cryptocurrency reaches a critical turning point, leading to potential price fluctuations in different directions, according to analysts.
In a post on X, pseudonymous crypto trader HoneyBadger stated that the market is currently experiencing an excess of leverage, allowing market makers to take advantage of high emotions and risky behavior. HoneyBadger added that market makers are having a great time capitalizing on this situation.
Data from CoinGlass reveals that $39 million worth of leveraged positions in Bitcoin were liquidated in the past 24 hours, with $18.38 million in long positions and $20.62 million in short positions.
HoneyBadger pointed out that the Bitcoin price chart is forming a symmetrical triangle, indicating a neutral pattern instead of a bullish ascending or bearish descending triangle that traders typically rely on to determine its direction.
HoneyBadger warns traders that they may misinterpret the chart as a “retest of the triangle” and enter long positions with high confidence, only to be caught off guard by a fakeout, where the price briefly moves out of the chart pattern before quickly retracting.
On the other hand, Mechanism Capital co-founder Andrew Kang is more optimistic and believes that the upward trend will continue, leading to new all-time highs after the Bitcoin halving on April 20. Kang predicts that BTC will reach $80,000 by May.
Currently, Bitcoin is trading at $70,500, with the support level of $68,500 being tested three times in the past week, according to CoinMarketCap data. Over the past seven days, the price has hovered between $66,100 and $72,520.
Bitcoin experienced a brief 3% drop below the support level on April 10 following the release of disappointing United States inflation data. Another significant drop occurred on April 2, where the price decreased by 5% from $69,450 to $65,970, resulting in the liquidation of $50 million worth of Bitcoin long positions.
The increase in leveraged positions taken by traders in recent days indicates that a similar 5% drop will have a much greater impact on long positions. If Bitcoin’s price increases by 5% to $73,819, approximately $2.14 billion in short positions will be liquidated. Conversely, if the price drops by 5% to $66,671, around $1.63 billion worth of long positions will be liquidated.
Gold proponent and Bitcoin critic Peter Schiff believes that there are too many people with long positions in Bitcoin who are overly confident and believes that they may be disappointed as markets rarely work out as expected.
Amid the volatility, HoneyBadger stated that he is staying on the sidelines and not worrying about missing out on short-term price dips. Similarly, crypto trader Jelle advised his followers to refrain from trading and avoid getting caught in leverage-related losses.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and make informed decisions when it comes to investments and trading.