1 November 2024

Crypto Analyst Cautions on Bitcoin's Recent Surge, Advises Caution Amid Uncertain Market Conditions

Prominent crypto analyst Justin Bennett warns that Bitcoin's recent rally above $68,000 may not be sustainable, advising traders to exercise caution amid mixed market signals.

Crypto Analyst Cautions on Bitcoin's Recent Surge, Advises Caution Amid Uncertain Market Conditions

A prominent crypto analyst has issued a warning regarding Bitcoin (BTC), indicating that despite its recent rally above $68,000, the cryptocurrency is not yet in a clear position for sustained growth.

Justin Bennett, a well-known crypto strategist with over 133,400 followers on social media platform X, shared his insights on the current market dynamics. He noted that while Bitcoin's price is on the rise, the signals are mixed, and the rally may not be sustainable, primarily driven by speculative trading and weak spot market volume.

Bennett expressed concern about the recent Bitcoin breakout from a seven-month trading range, highlighting that this occurred on a Friday with low trading volume. He emphasized that the rally is largely fueled by perpetual futures trading, with open interest (OI) returning to levels seen in late July.

"I’m not going to make any bold predictions because the data is conflicting at the moment, but if you’re a trader, there’s absolutely nothing wrong with being cautious here," Bennett advised.

Open interest is a critical metric that measures the total number of outstanding derivatives contracts for an asset. A sudden spike in OI can lead to a leverage flush, where overleveraged traders are forced to liquidate their positions, potentially triggering a deeper market correction.

Bennett pointed out that Bitcoin bulls need to maintain a price above $68,200 to avoid a potential downturn. He remarked, "It’s been a strange week, to be honest. On one hand, whales are holding steady compared to retail investors, while on the other hand, spot traders have been largely inactive since Monday. This rally has been primarily driven by perpetual contracts, which is not typically a healthy sign."

As of now, Bitcoin is trading at $68,241. Bennett also analyzed USDT dominance (USDT.D), which recently broke below two key support levels. USDT.D measures the proportion of the crypto market cap that is held in the stablecoin USDT. A declining USDT.D is generally seen as bullish for Bitcoin and altcoins, indicating that traders are using their stablecoins to acquire more crypto assets.

"Tether dominance, which moves inversely to Bitcoin, is tracking nicely. Currently, it is just below a confluence of support at 5.26%. A sustained break below this level could lead to recent lows and potentially the 2018 trend line, which might result in a 20% rally for BTC," Bennett noted.

At the time of writing, USDT.D is at 5.24%, still below the critical support levels identified by Bennett.

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Source: The Daily Hodl