How Bitcoin Open Interest Could Lead to a Big Correction

A few hours ago Bitcoin made another sustained move higher to knock on $9,400, its highest price since early November. The move added 5% to BTC prices lifting it for the fourth day this week.

A golden cross is looking to take place on the daily chart within a week. This bullish trend reversal signal happens when a faster 50-day moving average crosses above the slower 200-day MA. The last time this occurred was in April 2019, just before the big rally to $13,800.

Bitcoin Open Interest Approaching $1 Billion

Things are not all bullish yet though, as some signals are flashing for a pullback. Open Interest (OI) is the total number of outstanding derivative contracts, such as options or futures, that have not been settled for the asset. OI on BitMEX is currently approaching $1 billion where it has historically been rejected.

BitMEX OI approaching $1bn, historically OI tends to get rejected over $1bn & 100k $BTC pic.twitter.com/LN8ZPRfULl

— unfolded. (@cryptounfolded) January 28, 2020

Other analysts and have also observed these levels and are calling for a correction. A correction here would drop the asset back into the mid-$8k level but it could go even further. Some cryptocurrency traders are still considering a 40% pullback which could dump as low as the mid-$5k range but this too seems unlikely the longer it holds at these levels. Popular cryptocurrency trader and analyst Josh Rager pointed out;

$BTC

How long you bears going to stay bearish?

The downtrend is clearly broken on high time frame and if Bitcoin closes above $9557, that's a higher-high

Sure, BTC could pullback but stop with the $5k calls until price breaks at least below $8k (if it even gets there again) pic.twitter.com/MHLuSQih6M

— Josh Rager 📈 (@Josh_Rager) January 28, 2020

Why So Much Bearishness?

So far this year, which is just a month old, Bitcoin has made close to 30%. This makes it one of the best performing Januarys in its ten-year history. Gains have been primarily due to wider global events such as geopolitical tension in the Middle East, pressure on stock markets and fiat as a result of the China Coronavirus outbreak, and general FOMO as the halving approaches. Any correction that does occur is only likely to be a small dip before the upward momentum resumes.