- Bitcoin’s rally to $68,400 may have been the “Uptober” top due to resistance at $68,000 and a bearish divergence in a key BTC price metric.
- The Bitcoin-USDT futures market is overleveraged, with the estimated futures leverage ratio reaching an all-time high across exchanges.
- Bitcoin’s price chart shows a third bearish divergence, which has historically been followed by a 25%+ correction.
Bitcoin’s price has started to bleed lower over the past day, and there are signs the recent high of $68,500 might have been the peak of the Uptober rally. Let’s examine the factors that explain why Bitcoin’s high may have been a local top.
Overleveraged Bitcoin Futures Market
According to CryptoQuant CEO Ki Young Ju, the current estimated Bitcoin futures leverage ratio with respect to the USDt (USDT) pair across all exchanges has reached an all-time high. This means the entire crypto derivatives market is overleveraged, including USDT pairs with Ether (ETH) and Tron (TRX).
Prolonged periods of overleveraged futures are common in bullish environments. However, according to crypto researcher Axel Adler Jr, there is the possibility of a volatility shakeout in either direction. Adler Jr notes that currently leverage volume on the top three exchanges stands at 32%. A rise above 55% could trigger a cascade of liquidations.
Continued Negative Spot Cumulative Volume Delta
During the Q1 rally, Bitcoin’s aggregated spot cumulative volume delta (CVD) was consistently rising. This metric highlights buying pressure from retail investors on exchanges. At present though, the aggregated spot CVD has declined during this latest bullish period, meaning retail continues selling at higher prices.
According to onchain analyst XBTManager, for upward momentum to continue, demand needs to increase on exchanges. However, there are currently more signs of weakening, which could push prices back into the $63,000-64,000 demand zone.
Third Bearish Divergence on Bitcoin Charts
Previously, Cointelegraph reported Bitcoin’s six-and-a-half-month downtrend has broken to form higher lows. Each higher low was a failed attempt to break the descending resistance. On the 12-hour chart, there is precedent for another correction.
Each time Bitcoin has formed a higher low and tested the trendline, it has shown a bearish divergence on the RSI and MACD. These divergences have historically been followed by a 25-30% price drop. A 25% drop from current levels would mean a retest of the $52,000-50,000 range.
A key invalidation would be if the RSI, MACD, or both indicators formed a new high relative to their previous top, which would be bullish for Bitcoin.
