Bitcoin Could Extend Gains Amid Speculation, But Volatile Conditions May Persist

Bitcoin has surged past $111,000, achieving a new all-time high and reigniting discussions about potential market volatility driven by speculative trading.

• Bitcoin’s price noted strong bullish momentum, while speculative traders exhibited short-term bullish conviction.

• On-chain metrics warned of potential selling pressure as BTC set a new milestone.

Bitcoin [BTC] pushed past the $111k-level on the price charts, setting a new all-time high at $111.8k.

Around 2% above its previous ATH at $109.6k (an ATH set in mid-January), traders in long positions now do not want to believe that a local high could be in.

Source: CryptoQuant

And yet, there may be some similarities to December. In a post on CryptoQuant Insights, user Amr Taha noted that the Estimated Leverage Ratio climbed to 0.2.

This resembled the levels the metric reached in December 2024.

Source: CryptoQuant

The Open Interest on Binance was near its December levels as well. The high OI reflected strongly bullish sentiment, but also meant that volatility could be high in the short term.

Here, it’s worth noting that high speculative interest often tends to amplify rallies and pullbacks.

Evidence of market selling, profit-taking, as Bitcoin makes ATHs

Source: CryptoQuant

Binance’s netflow data showed that 4,435 BTC was sent to the exchange on 22 May. This was the largest positive netflow since 07 April. The positive inflows suggested imminent selling pressure as the price hit new highs.

And yet, the 30-day moving average of the netflow data to Binance displayed a value of -1,318 BTC. These deeply negative values were surpassed in January 2023, a considerable amount of time ago. Bitcoin had begun to recover from the bear market then, but was not yet in a bull market.

Therefore, despite the positive netflows, long-term holders have little reason to panic and sell just yet.

Source: CryptoQuant

The adjusted SOPR (aSOPR) metric is used to gauge the average profit or loss realized by all tokens moved on-chain. Its 7-day moving average showed a reading above 1, indicating more investors have been selling at a profit.

And yet, the 7-day moving average was not close to its March 2024 or November 2024 highs, although it was moving there. Hence, if historical patterns hold up, Bitcoin might have a lot more freedom to expand in the current rally.

Long-term investors could look for long-term market top signals. The heightened Open Interest implied that traders and short-term holders should expect volatility and be prepared to take some profits.

Conclusion

As Bitcoin approaches unprecedented price levels, market dynamics suggest both opportunities and risks. Traders should remain vigilant, keeping an eye on volatility indicators while long-term holders might find reassurance in historical recovery patterns. Adapting strategies to current market sentiment will be crucial in maximizing potential gains while managing risks.