Key Points:
Bitcoin open interest (OI) indicates an overheated rally.
BTC could rise to $140,000 if historical patterns repeat.
The daily RSI has reached overbought levels and that is a good sign.
The top crypto has seen gains of 23.3% during this period and its yearly performance swung to positive territory as a result.
Trading volumes have been quite high lately with $76 billion worth of BTC exchanging hands on May 7 along with $60+ billion flowing through the system on both May 8 and yesterday.
BTC Open Interest Sends Sell Signal?
Open interest (OI) for BTC futures has now increased to its highest level since January 21. Interestingly, this was the date when Bitcoin reached its all-time high this year and then started a strong descent to a yearly low of $76,000 just a few months later.
When OI is at such high levels, a strong pullback typically occurs as market participants prompt a long squeeze to flush out excess leverage and gather enough liquidity to push the price higher.
Back in January, macroeconomic conditions were actually not unfavorable. However, the market was also taking a breather after a strong post-election rally that pushed BTC to its current all-time high.
Can a strong downtrend begin in the next few days? Let’s look at Bitcoin’s price action and historical patterns.
‘Golden Cross’ Could Push BTC to New All-Time High
We have been keeping track of Bitcoin’s price action in relation to its 21-day and 200-day EMAs, as a bullish crossover between the two indicators has resulted in big gains for the top crypto just a few months later.
The first time it happened in the time period covered by the chart, the price rose from around $27,000 to $72,000.
Meanwhile, the next instance that a ‘golden cross’ occurred, the price rallied from $60,000 to $106,000, which is BTC’s current all-time high.
However, it is worth noting that there have been some false positives along the way. These are bullish crossovers that don’t end up propelling BTC to higher highs.
In a previous article, we shared a bullish price target of $140,000 if this turns out to be one of those crossovers that push BTC to new all-time highs. However, two other scenarios can still unfold where the outcome will be different.
The first is a weak crossover. This is a scenario where the rally does not manage to gain enough strength to push BTC to higher highs.
Interestingly, every time this happened, the Relative Strength Index (RSI) failed to reach overbought levels.
In contrast, the ‘golden crosses’ that ended up propelling BTC to higher highs were followed by a strong push in the RSI to overbought territory.
Latest Rally Has Resulted in Overbought RSI
In the case of our latest rally, this has already been the case as the RSI currently sits at 71 – meaning that the uptrend has gained strong momentum.
The second scenario that may result in a failed push to new ATHs is a post-overbought pullback. However, this is not necessarily bearish. In fact, it is often the necessary move that the market needs to make to raise enough liquidity to keep the rally going.
The most relevant support in all of these bullish scenarios has been the 200-day EMA. The price has only dropped below this marker one time in the instances that have pushed BTC to new all-time highs.
Hence, as long as the price stays above that threshold – or the price action pulls a bear trap, as it happened once – BTC will remain on track to reach this long-term target of $140,000 per token.
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