More Trouble Ahead for Bitcoin? Crypto Analyst Warns of an ‘Open Outcome’ as BTC Drops Below $37.5K
Popular cryptocurrency trader CrediBULL took to X (Twitter) to analyze Bitcoin’s drop below $37,500 and warn his 350,000 followers that more volatility may lie ahead.
After Bitcoin liquidated leveraged long positions under $37,500, CrediBULL noted that open interest (OI) on exchanges rose significantly. “Which means a lot of levered players just positioned themselves on this drop rather than it serving to wash them out – which is not ideal,” he said.
The trader warned that OI has returned to the “danger zone,” indicating that volatility could surge. “We will either see 1) a major short squeeze right back up or 2) a continued flush back down. Neither scenario is off the table atm (or necessarily more likely),” CrediBULL said.
This suggests the direction of the next big move is uncertain. The trader advised sitting on the sidelines until volatility plays out instead of rushing in with new positions.
As CrediBULL puts it, traders should “wait for the volatility to play out and THEN take action.” If Bitcoin sees a short squeeze above $37,600, that would be a signal it’s safe to enter long positions on the bounce. However, further downside could also materialize, potentially offering a chance to buy lower.
CrediBULL Cautions on Stock Market Correlation
CrediBULL also weighed in on the relationship between Bitcoin and stock market movements. He acknowledged the two markets have correlated since around 2020. However, CrediBULL believes this is primarily due to both experiencing a “secular bull” cycle that typically causes assets to trend upward together.
The trader cautions against assuming the correlation means one market is driving the other. “This doesn’t necessarily mean one is causing the other to move up or that one can only move up with the other,” CrediBULL said.
Correlation is not causation- while BTC and stocks may have been correlated since 2020-ish I think this is more a factor of both markets being in a secular bull which means more often than not they will both be moving up, together. This doesn't necessarily mean one is causing the…
— CrediBULL Crypto (@CredibleCrypto) November 26, 2023
He pointed to a number of other factors that have correlated with Bitcoin bull runs over time, such as liquidity cycles, halving events, gold and copper markets, China’s economic activity, and 4-year U.S. election cycles.
Given these various intermarket connections, CrediBULL questioned how anyone can say stock market performance alone dictates Bitcoin’s price action. He argued it is likely an amalgam of influences driving Bitcoin, if any single factor at all.
For this reason, CrediBULL disagreed with the premise that Bitcoin can only set new all-time highs if traditional markets also rally. The picture is far more complex than relying on a sole correlation, in his analysis.
In summary, one of Bitcoin’s most followed analysts is warning that with OI elevated after the drop under $37.5K, the market may experience significant volatility in the near future without a clear bias. According to CrediBULL, the outcome remains “open” for now.
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