Bitcoin Faces Potential Pullback to $100,000 as Volatility Surges

Bitcoin traders are advised to brace for a potential pullback to $100,000 as the cryptocurrency's recent rally, driven by the derivatives market, faces heightened volatility. The derivatives market has seen significant trading volume, with the Open Interest (OI) reaching a record high of $74 billion. This influx of capital into the derivatives market signaled bullish conviction, pushing Bitcoin to an all-time high of $111,980 on May 22nd. However, the build-up of liquidation levels at $100,000 and lower could attract prices downward, as price tends to move towards liquidity.

Data from Coinalyze indicated that the OI trend has flattened out after Bitcoin reached its new all-time high. The Funding Rate, which had been strongly positive, fell to neutral levels over the past 24 hours. This suggests that traders may be taking profits, leading to a potential short-term pullback. Additionally, a post on CryptoQuant Insights highlighted that spot demand was dwindling, while futures trading volume remained high. This discrepancy suggests that investors are cautious about buying Bitcoin above the $94,000-$96,000 area, which served as resistance earlier in May before the price broke out to nearly touch the $112,000 mark.

The price action of the past six months shows a possible range formation, with two potential routes in the coming weeks: a sustained uptrend or a reset to $100,000 or even $93,000. When ranges form, price action within the range induces liquidation levels to build up around the extremes. The retracement to $77,500 in March and the subsequent recovery saw short liquidations build up at $99,600, $108,000, and $113,000. The first two levels have been swept, and the dwindling spot demand suggests a market reset is possible, with $113,000 potentially out of reach for now.

The 3-month chart underlines the build-up of liquidation levels at $100,000 and $92,000 as the next potential targets. Depending on profit-taking activity and whether the bulls can regain their footing, Bitcoin might cede $106,000 to the bears again. Institutional buying is supporting the market, and holding above $100,000 is key to avoiding a deeper correction. As long as Bitcoin continues to close above $100,000 and dips remain shallow, the path of least resistance appears to be higher. However, a clean breakout above $108,000 could accelerate the price into new highs, while a breakdown below $104,000 would expose the $100,000 support zone for a potential retest.