The Bitcoin price has barely moved a few hundred dollars since late last week, but a vital metric hints at another aggressive move. In the meantime, the cryptocurrency is likely to keep trading sideways until another liquidation event flips momentum into a specific direction.
As of this writing, Bitcoin trades at $26,100 with sideways movement in the last 24 hours. In the previous seven days, BTC recorded similar price action while other tokens in the top 10 moved in tandem except for Binance Coin (BNB) and Solana (SOL).
Bitcoin Price On Brink Of New Liquidation Event?
As the Bitcoin spot price trends sideways, most of the action turns to option contracts where “smart money” is positioning for a big move. According to a report from derivatives platform Deribit, traders in the sector are betting on the long side solely based on the potential approval of a Bitcoin price spot Exchange Traded Fund (ETF) in the US.
Thus, most traders have been buying call (buy) contracts for Bitcoin to rise above $30,000 by the end of the year. These might have been betting on the regulator and courts to announce a decision from the many petitions or because of the case filed by asset manager Grayscale.
Neither of these events has come to fruition, which has led to a decline in the overall sentiment across derivatives. As the spike in call buyers suggested, this sentiment has been primarily bullish but will likely turn negative as the US stalls its Bitcoin price spot ETF decision.
Deribit stated:
Constant positivity on ETF approval has been the main driver for medium-long-term Call buying. And yet as this moves out the timeline from Q3 to Q4 to even ’24, patience is running thin. With delays, drifting confidence & macro headwinds, we start to observe downside hedges.
These hedges might have contributed to the Bitcoin price’s recent action as operators sell their spot position to cover their call contracts with late expiration. In that sense, the main catalyzer was the liquidation cascade that the cryptocurrency experienced when moving around $29,000.
At that time, as BTC trended sideways, open interest across the derivatives sector trended to the upside. As pointed out by an analyst, a similar situation is taking place currently and could lead to another aggressive move with a downside potential.
#Bitcoin Open Interest continues to rise again. Price is still moving sideways.
I would assume that we’d see some proper action over the next couple of days as long as open interest keeps rising at this pace. pic.twitter.com/VV2xAds0t4
— Daan Crypto Trades (@DaanCrypto) August 28, 2023
Cover image from Unsplash, chart from Tradingview