On-chain analysis examines how Bitcoin (BTC) Futures markets hitting a historic high of $17 billion could impact Bitcoin price action in the coming weeks.
Bitcoin price briefly grazed $38,000 on Thursday as the bulls drove BTC to a third yearly peak within the space of 3 weeks. On-chain analysis examines how BTC Futures markets hitting a historic high of $17 billion could impact BTC price action in the coming weeks.
Over the past month, Bitcoin hit 3 new price peaks for 2023. The rally has been majorly attributed to corporate investors buying up BTC to front-run the impending approval of Spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC).
However, a closer look at the derivatives trading data shows that investors have piled on record amount of capital inflows into BTC Futures markets during that period.
The Coinglass chart below illustrates how BTC Open Interest stood at $12.3 billion a month ago, on October 11. But that figure since grown rapidly by reaching an 18-month peak of $16.5 billion on November 11.
This means that futures markets traders have bet an additional $3.8 billion on BTC price rally within the past month.he last that b
Open Interest quantifies the total capital invested in active or outstanding BTC futures contracts. Typically, an increase in Open Interest is a bullish signal indicating that more investors are bringing capital into the markets that those exiting their positions. When it increases during a rally, it means investors remain confident that the current price uptrend will continue.
For two main reasons, strategic investors will anticipate this bullish indicator to drive up BTC price above $40,000.
Going by this historical analysis, BTC price is likely to make another leg-up toward reclaiming $40,000 in the days ahead.
From an on-chain perspective, the Bitcoin futures markets hitting $17 billion for the first time in 18 months puts BTC in a prime position to break into a new 2023 peak above $40,000.
However, the daily time frame, technical analysis indicators suggest that BTC price will enter a momentary consolidation phase before breaking out above $40,000.
As seen below, at $37,100 Bitcoin price is current trading above the Upper Bollinger band of $37,081.
When the current Bitcoin (BTC) price is higher than the Upper Bollinger Band, it suggests that BTC is trading at a relatively higher price compared to the upper boundary of the typical price range. This situation can indicate that BTC is in overbought territory. Traders often interpret this as a bearish signal, as it may suggest that BTC is at risk of a price pullback or consolidation.
However if BTC price retraces, the bulls will mount signifiant support wall around the lower Bollinger band at $34,900. Failure to hold that support level could effectively turn the Bitcoin price rally on its head.
But on the upside, the bullish momentum in the Futures markets could drive BTC price above $40,000. However, in that case, the bulls must scale the major ressistance territory at $38,200 to be confident of reclaiming $40,000.
Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.