Key Takeaways:
- 30% of Bitcoin futures positions stand leveraged on one derivative exchange.
- Analysts fear a potential long-squeeze event.
- Bitcoin risks dropping to $22,000 in 2023 if such a liquidation event happens.
YEREVAN (CoinChapter.com) — Bitcoin (BTC) traders have accelerated their borrowing to gain exposure in the futures markets, according to Glassnode data.
Big Bitcoin Price Flush Ahead?
As of Sep. 6, the Bitcoin-margined positions comprised about 35% of the futures market’s open interest, led by enablers at the BitMEX exchange, where the leveraged bets have surged to the highest in 2023.
Simply put, investors have been borrowing funds against their Bitcoin collateral to bet on the crypto market’s next directional bias.
The overexposure has prompted analysts to see a wave of collateral liquidations in the crypto market ahead. For instance, James V Straten, data analyst at CryptoSlate, notes that the next Bitcoin price drop could trigger forced closures of the open futures contracts betting on a price rise.
In the derivatives market, exchanges or brokers liquidate the open positions by selling their underlying collateral. Since collaterals in the crypto market are typically the underlying tokens, a wave of liquidations could intensify the selling pressure across the spot Bitcoin market — also called a “long squeeze.”
“Expect another flush out this month, and based on the crypto margin, it should be quick, as value and collateral are declining at the same time,” said Straten.
BTC Price Outlook for 2023
The BTC price is up 55% so far in 2023, its gains led by the prospects of a Bitcoin ETF approval in the US and the US Securities and Exchange Commission’s decision to call it a “commodity.” Moreover, the market’s expectations of a pause in interest rate hikes have also boosted BTC’s upside bias.
But Bitcoin’s year-to-date rally has shown signs of exhaustion in recent weeks. That is primarily due to a growing appetite for the US dollar and Treasuries. As of Sep. 6, the BTC price was around $25,750, eyeing a decline toward its psychological support level of $25,000.
A decisive close below could have the BTC bears eye approximately $23,750 as their next downside target, thus triggering long liquidations near the $24,000-strike target. More selloffs would bring levels near $22,000 in view, down 15% from current price levels.
Conversely, a rebound from the $25,000 support could rally the BTC price toward $28,000 in 2023.
The post Debt-Fueled Bitcoin Futures Bets Hit Yearly High on BitMEX — Too Risky for BTC Price? appeared first on CoinChapter.
