Bitcoin (BTC) Leverage Flush Imminent, Warns Analyst Willy Woo

Renowned technical analyst Willy Woo sounded the alarm on June 2, advising against taking "paper bets" on Bitcoin (BTC) due to high levels of leverage in the market. Woo cautioned that the current environment is ripe for "liquidation hunts," which could lead to a significant purge of bets before the next major upward swing.

Understanding the Risks of Leverage

According to Woo, the Bitcoin (BTC) market is experiencing an "open season on liquidation hunts" due to excessive betting. This phenomenon occurs when traders use leverage to amplify their positions, making the market more susceptible to sudden and drastic price movements. When the spot price of Bitcoin (BTC) moves against these over-leveraged positions, traders are forcibly liquidated, creating a cascade effect that can lead to increased selling pressure and volatility.

Bitcoin (BTC) Open Interest Reaches All-Time High

The Bitcoin (BTC) open interest (OI) hit an all-time high of $80 billion on May 23, indicating a significant buildup of leveraged positions. Although OI has since fallen to $72 billion, it remains elevated, suggesting that the market is still heavily leveraged. This surge in OI is a clear indication that massive leveraged positions have been built up, with many speculators holding large positions using borrowed money.

Impact on Bitcoin (BTC) Price

The current Bitcoin (BTC) price is up marginally, having reached an intraday high of $106,450 before retreating to around $105,350 during Tuesday morning trading in Asia. Since falling from its May 22 all-time high, the asset has remained in consolidation around current levels for the past few days. While it looks strong on the long-term view, Woo’s warning suggests that the market could experience increased volatility if the "casino hitchhikers" get liquidated.

M2 Money Supply Hits All-Time High

In related news, the M2 money supply has hit an all-time high of $21.86 trillion, which is good news for risk-on assets such as Bitcoin (BTC). This development could provide a boost to the cryptocurrency market, potentially offsetting the impact of the impending leverage flush.

As the Bitcoin (BTC) market navigates this critical juncture, investors and traders must remain vigilant and adapt to the changing landscape. With the risks of leverage and liquidation hunts on the horizon, it is essential to approach the market with caution and carefully consider the potential implications of Woo’s warning.

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