Crypto analyst Ardi has pointed to a bear market divergence to explain what has been going on with Bitcoin’s price for a while now. His analysis comes just as BTC continues to struggle to hold above $70,000 amid the U.S.-Iran war and rising oil prices.
Analyst Explains What Is Happening With Bitcoin as Price Struggles
In an X post, Ardi noted that this is the first time in this bear market that Bitcoin’s price and open interest have diverged on an intermediate timeframe. BTC has climbed over the last six weeks to a low of around $60,000 while its open interest has declined during the same period. He stated that this indicates the recent rally wasn’t driven by new buyers entering, but rather by a large part of it being shorts closing their positions.
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The analyst further remarked that traders who shorted the Bitcoin top like saw the drop to $60,000 and felt it was a good position to take profits. “They locked profit. They exited. That exit pressure pushed the price up,” he said. However, Ardi added that this development is not the same as fresh demand, which is sufficient for a reversal.
He said that open interest typically rises when the Bitcoin rally has real strength, as shorts close and longs open to replace them. Meanwhile, new capital enters, forming the foundation for the bullish reversal in BTC. Ardi declared that none of that has happened in this range, with trading activity one-sided even as the leading crypto climbed to as high as $75,000 last week.
Ardi said that the problem is that short covering has a ceiling, and once the last short has closed, the source of upward pressure is gone, leaving no other factor to sustain the move to the upside.
How It Could Play Out For BTC In The Near Term
Crypto analyst Colin noted that Bitcoin has been tracking inside the channel of a bear flag since the February 6 low. In line with this, he opined that BTC will eventually break down and that it is not a question of if but when. The analyst also questioned how high the leading crypto will rise before it suffers this breakdown.
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Colin opined that the highest price Bitcoin might reach before this projected breakdown is around $80,000. He described this as the best-case scenario at this point and that BTC might not even reach this psychological level. However, the analyst also admitted that there are some outlier outcomes, like BTC rising above $80,000 if the U.S.-Iran war suddenly ends.
At the time of writing, the Bitcoin price is trading at around $70,700, up in the last 24 hours, according to data from CoinMarketCap.
Featured image from Getty Images, chart from Tradingview.com