Is Bitcoin price going to crash again?

Bitcoin’s recent 36% rebound from its April low of $74,500 has stalled at the $106,000 resistance level. This price ceiling, coupled with accumulating bid-side liquidity around $93,000, raises concerns about a potential near-term correction. Despite the impressive rally, the inability to decisively break above $106,000 suggests a possible downward trend.

Remarkably, over 97% of Bitcoin holders are currently in profit. Data from CryptoQuant indicates that less than 2.8% of investors were experiencing losses when the price reached $102,000 on May 15th. This high percentage of profitable holders, while positive, is often associated with overheated markets and may precede price corrections as investors take profits. Continued price increases would further solidify these profits.

Further fueling the potential for a pullback is the elevated open interest in Bitcoin derivatives. On May 14th, open interest hit a near-record high of $67.5 billion as the price approached the $106,000 resistance. This, coupled with a 90-day high in CME Bitcoin futures open interest, suggests significant market activity and potential for substantial liquidations if the price fails to break through resistance. CME currently holds the largest share of open interest (22.9%), followed by Binance (17.4%) and Bybit (10%). The high open interest mirrors the situation in late January, which preceded a 16% drop in seven days.

Technically, Bitcoin’s rally has encountered a supply congestion zone between $106,000 and the all-time high of $109,000. A previous rejection from this zone in January resulted in a 27% price drop. A decisive daily close above $106,000 is crucial for sustaining the upward momentum; failure to do so could trigger a decline towards the year’s open at $93,000. Data shows a significant build-up of ask orders above $106,000, highlighting the strength of this resistance level. The overall situation warrants caution, and investors should proceed with awareness of potential market volatility. This analysis is for informational purposes only and does not constitute financial advice.