Alphractal Warns About Bitcoin Market Conditions

Cryptocurrency analytics firm Alphractal has raised concerns regarding Bitcoin’s current market situation, highlighting excessive leverage as a critical warning for traders.

According to the firm’s latest analysis, the Leveraged Traders Sentiment indicator reveals an increase in the number of traders exposed to leveraged positions, potentially leading to mass liquidations.

Historically, high levels of leverage have often resulted in substantial declines for Bitcoin due to long squeezes. Alphractal mentions that extreme peaks in leverage can sometimes mark local bottoms and indicate seller exhaustion, but the primary risk remains the liquidation of long positions. Such occurrences may result in unpredictable price movements, increasing market volatility.

Besides the leverage issues related to Bitcoin, Alphractal has also noted a decrease in altcoin trading volume. The total trading volume for altcoins has recently returned to levels seen in 2021 before starting to decline, indicating decreasing public and institutional interest.

Altcoin volume typically correlates with price action and tends to be higher during bullish phases. While a decline in volume doesn’t definitively signal the end of a bull cycle, Alphractal warns that a similar trend was observed in late 2021. Despite significant volume drops then, the total altcoin market cap still hit a new all-time high.

This is not investment advice.