A recent analysis suggests Bitcoin may be gearing up for the second bull run as the futures market becomes overleveraged.

Ki Young Ju, the CEO of CryptoQuant, recently provided data that indicates overleveraging in the Bitcoin-Tether (BTC-USDT) futures market, which could be a precursor for massive price movements.

Notably, his report assessed data from two important metrics: the BTC-USDT open interest to reserves ratio and the BTC-USDT open interest to USDT market cap ratio.

Bitcoin OI to Reserves Ratio

The first metric, the Open Interest to Reserves ratio, highlights how much open interest (unsettled futures contracts) exists relative to the amount of Tether (USDT) held in reserves by major exchanges. Notably, OI on exchanges recently reached an ATH above $19 billion.

The ratio, which includes Ethereum- and Tron-based USDT, covers 97% of the total USDT market cap, making it highly representative of the overall market. A steady increase in this metric suggests growing leverage in the market.

On July 29, the ratio had surged to 0.42, when Bitcoin’s price hit $70,016, as its recovery led to an uptick in BTC price. However, following the July 29 peak, it dropped alongside Bitcoin’s price, hitting a low of 0.27 in early August. 

Interestingly, this drop coincided with Bitcoin’s price falling to a six-month low of $49,577. This marked the end of a retracement phase. Since then, the metric has gradually recovered and now stands at 0.46. This recent recovery suggests increasing leverage as traders bet on a further rise in Bitcoin’s price.

BTCUSDT OI to USDT Cap Ratio

The second metric is the ratio of total BTC-USDT open interest to USDT’s market cap. This measure also reflects the level of leverage in the market and has closely tracked Bitcoin’s price movements throughout 2024. 

At the start of the year, this metric was at a low of 0.06, but it spiked to 0.12 in March, aligning with Bitcoin’s all-time high of over $73,000. Since the March peak, the ratio has fluctuated with Bitcoin’s price, reaching a low of 0.07 in early August when the price dropped to $49,577. 

However, it has since returned to 0.12, demonstrating a recovery in market sentiment. The rise of these two metrics suggests that Bitcoin could be on the verge of another bullish surge.

Notably, Ki Young Ju confirmed that a factor driving this overleveraging is the relatively low Maximum Drawdown (MDD) in this market cycle. 

Bitcoin On a Recovery Path

With less severe price drops, even traders using 3x leverage positions have avoided liquidation, encouraging more aggressive use of leverage. As a result, many traders are now heavily leveraged. This in turn sets up the market for a potential sharp move.

The ratio of total $BTC-USDT open interest to $USDT market cap tells the same story.

In this cycle, the low MDD seems to let even those with 3x leverage survive, which is why many are heavily leveraged, imo🤔 pic.twitter.com/8LbzmFFdFG

— Ki Young Ju (@ki_young_ju) October 17, 2024

Meanwhile, Bitcoin price has recently seen a resurgence, climbing by nearly 5% within two days earlier in the month and maintaining gains despite slight pullbacks. 

After breaching the $63,000 level, it continued its uptrend, recently reaching $67,000. However, the support at this level is weak, and if a correction occurs, bulls must defend the $66,119 pivot to prevent a drop into bearish territory.

Key metrics such as a surging Bitcoin open interest and low Google search interest signal that Bitcoin could rally substantially, as the cycle is still early.

Bitcoin is approaching its all-time high of around $74,000 after the recent spike over the last seven days. For context, the asset has rallied over 10% in the past week, reaching a three-month price high above $68,000 on Wednesday.

With analysts expecting the asset would reach its ATH before the November US election, the appreciation seems miniature compared to the potential rally Bitcoin could pull off eventually. Notably, two metrics show that the Bitcoin bull cycle is still nascent.

Market Participation Surges to ATH

Data from Coinglass shows that the open interest of the largest cryptocurrency by market cap has surged to new highs, hitting $39.67 billion on Thursday. Notably, this metric tracks the number and value of open derivatives and options positions on the premier crypto asset at a determined span.

The amount of funds actively traded on the Bitcoin market surged to $39.67 billion, surpassing yesterday’s high of $37.77 billion. This indicates increased interest and participation among traders, reinforcing bullishness.

Meanwhile, the Chicago Mercantile Exchange (CME) leads Bitcoin trading activities among other exchanges, providing liquidity worth $12.25 billion. Notably, being the largest futures exchange, CME accounts for more than 30% of the total derivative activities on the premier crypto asset.

Among traditional crypto exchanges, Binance, the largest platform by trading volume, commands a considerable amount of liquidity. Traders have opened about $8.08 billion worth of Bitcoin trading positions on the platform, accounting for 20% of the total derivative participation.

Furthermore, other notable exchanges, like Bybit and OKX, have billions of dollars in derivative positions opened on them, while Coinbase and Crypto.com provide liquidity in millions.

It bears mentioning that a spike in appetite for leveraged Bitcoin trading in such a manner precedes a corresponding price uptrend. This trend was apparent in the April and November 2021 spikes, with Bitcoin surging to its previous all-time high of $69,000 in the latter.

Bitcoin Search Interest Paints Bullish Bitcoin Picture

A further bullish Bitcoin scenario is evident in the miniature searches associated with the leading crypto asset. Data shows that the number of internet look-ups with the keyword “bitcoin” is nearing its all-time low despite Bitcoin approaching its all-time high.

Historically, search interest for Bitcoin spikes extensively as bull cycles mature. For instance, internet queries involving “bitcoin” surged to their peak popularity of 100 in November 2021, when Bitcoin touched $69,000.

Notably, surging interest signals the presence of retail traders, popularly speculated to be the market top. With the interest index still below 25, Bitcoin’s popularity and bull run are historically still in their early stages.

Analyst Aksel Kibar predicts a potential multi-month Bitcoin uptrend if key resistance levels break, citing historical breakout patterns.

Bitcoin has experienced a volatile week, moving from a sharp decline to a significant recovery. After dipping below $59,000 last Thursday, the crypto rebounded to reach a multi-month high of $68,000.

This surge was followed by a brief drop, stabilizing around $67,000. Amid the ongoing movements, some analysts now anticipate further gains while others warn of possible downturns.

Key Price Movements and Historical Patterns

Chartered Market Technician Aksel Kibar highlighted key moments in Bitcoin’s price history, identifying critical levels that could influence future trends.

His analysis focuses on several “Minor Highs,” points where Bitcoin previously encountered resistance and either consolidated or retraced. These include peaks originating from 2013 and the well-known 2017 high of $20,000.

Waiting patiently for that monthly breakout candle that would launch multi-month long uptrend. $BTCUSD https://t.co/IcHcVGuku1 pic.twitter.com/aENyl367U3

— Aksel Kibar, CMT (@TechCharts) October 16, 2024

Notably, Kibar pointed to the significance of “Breakout Candles” in Bitcoin’s monthly chart, such as the breakout near $1,000 in 2016, which triggered a rally toward $20,000 in December 2017.

He now anticipates another similar breakout, signaling a potential multi-month uptrend if Bitcoin breaches key resistance levels. This aligns with his earlier September observation that Bitcoin’s refusal to pull back from its all-time high and tight consolidation is a strong indicator of further upward movement.

Whale Activity & Market Shifts

Recent data from market intelligence platform Santiment supports the notion of a bullish trend, as whale transactions have reached a ten-week high. On Tuesday alone, the market recorded 11,697 transfers worth over $100,000, and Wednesday appeared to be on track for similarly high volumes.

This uptick in large transactions is usually a signal that institutional investors or large holders are preparing for a market trend shift, either through accumulation or repositioning of significant amounts of Bitcoin.

Additionally, Santiment reported an increase in Bitcoin’s dominance in social media discussions, accounting for over 25% of all crypto-related conversations. 

According to Santiment, the recent spike in whale transactions and increased social media dominance suggest that the rally may be temporarily paused due to profit-taking by key stakeholders and heightened retail FOMO.

Despite this, mid and long-term metrics remain bullish, indicating that any potential price correction is expected to be brief.

Diverging Analyst Views

Despite the optimism surrounding Bitcoin’s recent performance, not all analysts are aligned on future prospects. Analyst Rekt Capital pointed out that while Bitcoin successfully surpassed its August peak, it now faces significant resistance at the top of a long-term downward channel. 

Rekt Capital warned that should Bitcoin fail to close above this resistance zone, it could face a correction of up to 30%, potentially dragging the price down to $47,000. The pattern of progressively deeper corrections, starting from a 17% decline in March to the most recent 29% drop, suggests a similar pullback could occur if the resistance remains intact.

While the ongoing Bitcoin uptrend continues to endure, the leading crypto asset is at a critical decision point.

Seasoned market watchers are highlighting factors that could confirm a further upswing or signal the onset of another severe bearish market.

In a post on X, global macro investor Raoul Pal warned market participants not to get ahead of themselves by discussing extreme price targets for Bitcoin. He noted that the danger is not over until Bitcoin convincingly breaks the key psychological price level of $70,000.

Pal is cautioning against over-optimism until Bitcoin demonstrates solid upward momentum by surpassing $70,000. His warning came after Bitcoin first reclaimed $65,000, having tested the $58,000 channel earlier.

Veteran Analyst Says $72K Is Critical

While Pal targets $70K, veteran market watcher Peter Brandt argues that Bitcoin needs to cross over $72,000 before speculations for higher price targets become valid. Otherwise, the market may experience a significant correction following the one-month-long uptrend.

$72k for me https://t.co/BOfiNsz8KM

— Peter Brandt (@PeterLBrandt) October 16, 2024

In an analysis yesterday, Brandt highlighted that Bitcoin is in a “window” where it must either break through or risk having the window slammed shut. The chart illustrates how Bitcoin has faced resistance each time it approached the $70,000 target over the last seven months.

Specifically, it showed that during each failed attempt since the March peak to surpass the long-term trendline, Bitcoin underwent a significant downturn. Interestingly, each retracement has been more intense than the previous one, while the rebounds have been weaker.

For instance, after hitting $73,750, Bitcoin crashed to $60,000, rebounded to $71,500, then fell again to $56,500, surged above $68,000, and subsequently plummeted to $53,400. In the most recent case, Bitcoin tanked to $49,000 after recovering from the low of $53,400.

Bitcoin At Risk of 30% Collapse

Now that Bitcoin reached $68K yesterday, it has entered a problematic zone where it could either continue its upward trajectory or experience a significant decline, consistent with past trends.

Analyst Rekt Capital expressed a sentiment similar to Brandt’s in a separate analysis. He argued that the danger would be averted if Bitcoin could close this week above $68,000. Failure to do so risks a price crash of over 30% from the current level.

Interestingly, intelligence platform Santiment has cautioned that overheated calls for the $70K level for Bitcoin are in themselves a bearish signal. This is because the market’s direction tends to oppose the popular optimism in the community.

Notably, Bitcoin is preserving its recently accrued gains, reaching $68,375 as of Wednesday evening. Following a minor pullback, the leading cryptocurrency is hovering around $67,500 at press time, just 3.7% away from hitting $70,000.