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Bitcoin Liquidation Cascade Is Likely to Happen Soon

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VOC, Voice of Crypto, BTC

Bitcoin continues to hover around the $20,000 – $19,000 mark, and the controversy around the cryptocurrency continues to thicken.

After countless liquidations along the way in bitcoin’s descent from $65,000 to where it currently is, it appears the worst is yet to come.

According to new data from the Futures Open Interest in Bitcoin, a new wave of long or short liquidations is likely to happen if the price of bitcoin undergoes a significant fluctuation in either direction.

The Open Interest Metric

The Open Interest metric on any asset is a relatively simple one.

Like many other metrics, it attempts to predict the future price direction of said asset, based on its previous behavior.

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Put simply, the Open Interest on bitcoin’s futures is the total number of futures contracts held open by the market’s participants at the end of every trading day. This metric is commonly used to determine bitcoin’s market sentiment and the driving force behind its market trends.

Unlike other metrics for market sentiment, the Open Interest metric calculates the number of futures contracts from opened trades at the beginning of the day. It subtracts that number from the closed trades at the end of the day.

BTC Futures Contracts

According to data from CryptoQuant, the futures trades currently open on bitcoin could be primed for a liquidation cascade. CryptoQuant also notes that if the price of bitcoin deviates far enough from where it currently is, the bulls or bears could be vulnerable to huge losses.

This data from the Crypto monitoring network also shows that the levels on the Open Interest chart have been rising since bitcoin reached one of its deepest price levels this June.

Chart showing rise in Open Interest Data on Bitcoin Futures since BTC lows in June 

Chart showing rise in Open Interest Data on Bitcoin Futures since BTC lows in June | Source: CryptoQuant On Twitter

Bitcoin Future Price Trajectory

Over the year, liquidation cascades like the one CryptoQuant predicts have only happened three times. One of them was the wipeout that happened when $5.8 million worth of Bitcoin liquidations were recorded in one hour.

According to trading and futures data platform CoinGlass, there have only been $55.1 million in liquidations in the last 24 hours.

Data from CoinGlass showing total hourly and daily liquidations

Data from CoinGlass showing total hourly and daily liquidations | Source: CoinGlass

However, top crypto observers like Charles Hoskinson (creator of Cardano) have expressed optimism that bitcoin will soon mature and outgrow these price fluctuations as more countries and organizations begin to adopt it as a payment system.

Peter Schiff on Bitcoin Price Action

Peter Schiff, a popular economist and crypto skeptic known for attacking bitcoin, has come out with something else.

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Recently, Schiff has maintained that despite bitcoin appearing to be consolidating for another uptrend around the $20,000 level, it is very likely to experience an “extended crash.”

In an interview with Natalie Brunell yesterday, Schiff describes bitcoin’s current price action as a “false sense of security” as the buyers and the sellers continue to struggle to push the price above or below the $20,000 level.

Schiff predicts that bitcoin will likely crash to the $10,000 level in the long run and then trend further down to $5000. After calling it a scam, he claims that institutions are no longer interested in bitcoin.

 

Disclaimer: The author’s comments and recommendations are solely for educational and informative purposes. They do not represent any financial or investment advice. Always DYOR  (do your own research)

 

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Jim Haastrup is a freelance blockchain and metaverse writer. He helps founders, investors, startups, crypto, and blockchain enthusiasts connect with their audience and win investment through the written word.

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