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In 2023, Bitcoin has achieved significant gains, moving beyond the initial recovery stage and continuing its upward trend. The price of the crypto-asset has been fluctuating slightly above $34,000 as it benefits from the excitement surrounding spot ETFs.
However, it is nearing the overheating zone, a factor that investors should consider. As per the latest analysis from CryptoQuant, investors are advised to be “cautious” and avoid “overextending their investments.”
Bitcoin Approaching Overheating Zone
The open interest (OI) in Bitcoin futures has shown a variable impact on its price, sometimes pushing it higher and at other times indicating potential declines. Despite a sustained reduction in the overall supply of stablecoins over the past year, it is primarily the futures market that has driven Bitcoin’s price upward this year.
An analyst from CryptoQuant noted that Bitcoin’s price generally experienced an upward trend in conjunction with the increase in OI during the first seven to eight months of the year. It further remarked
“But nothing rises forever. Futures OI entered overheating territory in June ’23, and within two months, its price plummeted. The same thing happened in Oct ’22, when the OI was still in the overheating zone. In Nov’22, there was the FTX crisis, and there was a bigger futures liquidation than in Aug ’23.”
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Recently, Bitcoin’s OI has once again entered the overheated zone alongside a rise in its price. While a sudden downturn is not expected, caution is advised moving forward, according to the analysis, which also emphasized that investors should avoid overextending their investments.
If Bitcoin does experience a correction, it is expected to be relatively mild.
Shallow Market Corrections
Glassnode’s recent analysis indicates that the corrections faced by Bitcoin in 2023 have been considerably shallower compared to previous cycle uptrends, suggesting robust investor support and a positive influx of capital.
Moreover, Bitcoin’s market dominance has continued to rise, leading to a year-to-date increase in its market capitalization of over 110%.
Bitcoin has also gained more than 93% against gold in 2023, while ETH has risen 39% in gold terms. The blockchain intelligence platform noted that this strong performance occurs amid growing global uncertainty and is likely to draw the interest of traditional investors.
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