Bitcoin Nearing Key Liquidity Levels Amid Rising Open Interest

(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary by Shubh Varma , CEO and Co-founder of Hyblock Capital .

Market Overview Report - Week of October 22, 2024

Macro Overview

The recent positive economic data is unlikely to be directly attributed to the federal Reserve's rate cuts, as the effects of monetary policy generally take time to filter through the economy. This suggests that the Economy is performing well on its own, providing room for further cuts in the near future.

Optimism is building around potential liquidity-driven growth, with stocks continuing to reach all-time highs and more rate cuts anticipated in Q4. Risk assets like equities and Bitcoin are thriving under these liquidity conditions.

Looking ahead to the upcoming U.S. presidential election, market sentiment is increasingly shifting toward a potential Trump victory, which has historically led to higher bond yields and a bullish environment for equities and crypto assets like Bitcoin. Monitoring Trump's odds on platforms like Polymarket will be essential to gauging Bitcoin's pre-election price movements. As Trump's election odds rise, the market could start pricing in more growth and liquidity-driven trades, setting Bitcoin up for a breakout ahead of the election.

Market Sentiment and BTC Outlook

Over the last month, Trump's Polymarket odds have increased significantly, now standing at 64%, with Kamala Harris's odds at 35%. The delta between Trump and Kamala has grown to +28. This development is crucial as we near election day, with markets potentially pricing in a Trump victory more strongly than they did a month ago. Bitcoin's price action is likely to respond to these shifting odds, as political sentiment and market optimism continue to rise.

Leverage and Liquidity

We're seeing a neutral environment for long leverage after a period of clearing out. The increase in long leverage positions has stabilized, and it's important to monitor this as the week progresses for potential shifts.

Recent research has shown a tendency for weekly highs or lows to be set on Mondays, often within the first hour of trading. This pattern has been consistent for the past few weeks. For example, three weeks ago, the weekly high was set during the first hour of Monday trading, and last week, the weekly low was set in the same period. Currently, the weekly high is again set during the first hour of Monday this week, but it remains to be seen if this will hold.

Liquidity Cluster and Risk Areas

In terms of liquidity, we're seeing short-term high/medium leverage liquidity primarily building below the current price level. The key liquidity cluster above price (short liquidity) sits between 69.7k and 69.8k. On the downside, there are significant short liquidity clusters from 65.8k to 66.6k and a major level at 64.5k-64.6k.

Should bullish signals appear throughout the week, such as top trader long leverage increasing significantly, we may see the 69.7k-69.8k liquidity tapped. This level could offer a strong high-risk/reward shorting opportunity if bearish confluence is present. Profit-taking zones could range from the 65.8k-66.6k region down to the 64.5k area.

BTC ETF Inflows and Price Movements

There have been unusually large BTC ETF inflows over the past several days, with inflows exceeding 300 million on multiple occasions. Historically, this kind of activity has been followed by bearish price movements, and we may be seeing the beginning of a price dip as a result.

If this price dip unfolds, we'll want to see large outflows occur as BTC approaches long liquidity levels. This could establish a higher low, setting Bitcoin up for a potential run to new all-time highs.

Open Interest and Support Levels

Over the past 90 days, there has been significant open interest in the 61.1k-61.2k range and the 64.25k-64.3k range. As prices approach these psychological levels, remaining open positions could close at these "breakeven" points, potentially acting as support or future resistance.

Global open interest is up +20% over the last two weeks, while BTC-specific open interest has increased by around +12%.

This rise in open interest has been accompanied by an increase in passive bids and asks in the orderbook across various depths. Historically, this trend has been bearish, indicating friction in upward price movement.

Outlook for the Week

While Bitcoin remains bullish on a larger scale, there is notable friction preventing upward movement, especially around the 69.7k-69.8k liquidity zone. If price pushes up to this level, it may serve as an ideal point to short. On the flip side, a healthy price dip could clear out late long positions and pave the way for BTC to continue its upward trajectory.

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