Is Bitcoin price going to crash again?

Bitcoin’s (BTC) price has rebounded by more than 22% two weeks after hitting a low of $52,546, reaching around $64,121 on Sept. 20. Currently Bitcoin price has retraced to $62,761, with several technical and onchain indicators raising alarm about the strength of the recent rally.

Let’s look at the factors that could potentially drive Bitcoin price lower.

85% of Bitcoin’s holders are now in profit

Bitcoin’s recent break above $62,000 saw BTC price rise above the short-term holder realized price as this cohort of traders flipped some of their unrealized losses into profit. 

A chart shared by market analytics firm Into The Cryptoverse reveals that only 14.2% of Bitcoin investors were still in a position of loss when the price hovered around $62,600 on Sept. 20, while subsequently accounting for over 85% of the supply in profit.

The percentage supply in profit and loss evaluates the sum of unspent transaction outputs (UTXO) being in profit or not by comparing the price between when they were last moved and the current price.

If Bitcoin continues to rise from the current levels, more investors will remain in profit. A high number of holders in profit is often seen as a sign of an overheated market, which typically precedes or coincides with price corrections. 

As a result of this onchain signal, Bitcoin’s price may see pullbacks over the coming days as investors choose to book profit. 

Bitcoin futures open interest soars

In August, Bitcoin futures open interest rose sharply, peaking at $34.72 billion on Aug. 27. However, the price failed to break the $65,000 resistance and was followed by a 20% correction in 10 days. 

Similarly, with the latest run-up above $64,000, the open interest has increased by 22.7% since Sept. 8 to a four-week high of $34.72 billion on Sept. 20, according to Coinglass data.

With the current strong demand for BTC futures contracts, investors are contemplating the possibility of a pullback similar to that experienced at the end of August.

Some traders argue that the rise in Bitcoin futures open interest indicates excessive borrowing. 

A large amount of open interest can potentially increase price swings, particularly when traders hold multiple positions and decide to suddenly adjust their strategy.

It can also influence the overall sentiment of traders who use OI as a signal to decide whether to hold or sell their crypto assets.

Related: Bitcoin traders now agree $65K is ‘key’ BTC price resistance to beat

Bitcoin price hits resistance at $64,000

From a technical point of view, Bitcoin price is fighting resistance at $64,000. When the price was rejected from this level on Aug. 25, it recorded a 17.5% loss to $52,546, suggesting that the bears are aggressively defending this zone. Bitcoin bulls were required to produce a decisive daily candlestick close above this level to sustain the recovery.

Conversely, failure to flip $66,000 into support could cause the price to drop lower, with the accompanying long position liquidations pulling the price toward $62,000. 

Data from Coinglass showed a wall of ask orders building up above $64,000, reinforcing the importance of this resistance area.