Bitcoin — Watch The Open Interest Rate (And Time Your Buy)!

20. Sept.

On the 4H Chart, Bitcoin broke out of the ascending channel, which was a super important step.

Initially, it looked like a rejection was in place, but Bitcoin is holding this level for now. We’re not out of the woods yet, but the chart is starting to look better. Good.

The chart still shows strength based on all the indicators we discussed lately. MACD looks OK, the volume-based moving average is green, and the price trades above the EMA200.

Is everything good? Well, not really. There is a significant concern about the Open Interest (OI) rate.

OI represents the total number of open contracts in the futures market. After the recent rate cut decision, OI has spiked to unhealthy levels. This means that the market is heavily leveraged, which increases the risk of a sudden pullback if Bitcoin faces resistance. In the past, open interest at the current level has led to a (short) more substantial correction.

While the bullish momentum is still intact, caution is advised at these levels due to the elevated OI. A pullback could be triggered if sentiment shifts or BTC meets any significant headwinds.

Therefore, the outlook remains bullish, but I wouldn't be surprised if a short pullback would happen to flush the leveraged trades. Here's the important part: If this happens, this is the time you want to buy. Be careful with longs right now, and wait for a flush!