Certain cryptocurrency traders advise staying on the sidelines to evade being caught in a leverage-induced wipeout, asserting that they can make up for missed opportunities later.
Analysts caution that traders holding leveraged positions in Bitcoin (BTC), which currently sits at $71,113, may face unwelcome surprises as the cryptocurrency reaches a pivotal juncture.
According to pseudonymous crypto trader HoneyBadger, the market's previous ease has shifted, with excessive leverage leading to market makers capitalizing on heightened emotions and speculative behavior.
HoneyBadger highlighted that market makers are profiting from volatility, with $39 million worth of leveraged Bitcoin positions liquidated in the past day alone.
This includes $18.38 million in long positions and $20.62 million in short positions. As Bitcoin's price chart suggests a symmetrical triangle formation, indicating a neutral pattern, traders find it challenging to predict its trajectory compared to more defined bullish or bearish formations.
He says traders could misunderstand it as a "retest of the triangle," which would cause them to jump into long positions with undue confidence. He warns that a fakeout, in which the price exits a chart pattern for a short while before quickly returning, could catch these traders off guard.
Co-founder of Mechanism Capital Andrew Kang is more upbeat, believing that the market will continue to rise and reach new highs following the halving of Bitcoin on April 20.
"I expect BTC to touch $80K by May," wrote Kang in a post dated April 11. According to data from CoinMarketCap, Bitcoin is currently trading around $70,500 after testing its support level of $68,500 three times in the last week.
On April 10, at the same time as the announcement of the disappointing US inflation data that left many onlookers disappointed, Bitcoin briefly dropped 3% below its support level.
In addition, on April 2, there was an abrupt 5% decline in the price of Bitcoin, which caused long positions worth $50 million of the cryptocurrency to drop to $65,970.
According to recent remarks made by Peter Schiff, traders' increased use of leverage suggests that a possible 5% decline might have a big effect on long positions. Based on statistics from CoinGlass, about $2.14 billion worth of short positions would be liquidated if the price of Bitcoin increases by 5% to $73,819 USD.
Schiff, a well-known supporter of gold and an opponent of Bitcoin, contends that too many people have large, confident holdings in the cryptocurrency and think they are immune to losses. He issued a warning, saying that the majority of the time, market results fall short of speculators' expectations and leave them disappointed. This opinion was stated in an April 11 post on X.
Because of the market's volatility, both HoneyBadger and Arthur Hayes have chosen to remain out of it.
HoneyBadger highlighted the value of safeguarding capital and holding onto opportunities while expressing apathy towards missing out on transient price falls.
Similar sentiments were expressed by Arthur Hayes, who announced that he would not be trading until May due to worries about a possible cryptocurrency "firesale." Jelle, a prominent cryptocurrency trader, counseled his followers to be patient and not get sucked into leveraged trading, stressing the dangers associated with such tactics.
April 2024, Cryptoniteuae