Bitcoin's Rise Over $61K Could Signal Local Top, Binance Volume Indicates

• Bitcoin topped $61,000 in the run-up to the U.S. market open on Tuesday, with trading volume on Binance increasing.
• Jumps in Binance trading levels often signal a local market top, with bitcoin dropping shortly afterward.

Bitcoin BTC$92,016.58's surge above $61,000 in the run-up to the U.S. open on Tuesday could signal a short-term peak in the price of the largest cryptocurrency by market value, if trading volume patterns on Binance are any guide.

The 6% jump during the earlier part of the day was notable because BTC has recently tended to decline immediately after the start of equity trading in the U.S., according to Velo Data. However, the factors contributing to the spike hinted at market volatility rather than sustained upward momentum.

That's illustrated by activity on Binance. A net $85 million in spot volume, the highest in more than three months, flowed into the largest crypto exchange by market value in one hour, according to cumulative volume delta (CVD) figures from Glassnode. CVD tracks the net difference between buying and selling volumes.

Surges in Binance spot volume have coincided with local market tops in the past. In fact, similar instances on Aug. 8, 15, 20 and 23 were all followed by a pullback in the price of bitcoin. True to form, the cryptocurrency has retreated below $60,000 following this most recent uptick.

This movement suggests that some traders are leveraging these price bumps to offload bitcoin at prices above what they paid. A full $750 million of bitcoin was sent to exchanges in profit from short-term holders, defined as investors who have held BTC for less than 155 days, the second highest amount since the end of August.

This strategy of profit-taking during temporary price increases, potentially indicates a more cautious outlook among big participants.

The market’s overheated state was also reflected in the rise of futures open interest (OI), a measure of total funds allocated in open futures contracts. According to Glassnode, over 8,600 new contracts, denominated in bitcoin, entered the market.

Large spikes in OI often signal new money entering the market, with traders using leverage to capitalize on short-term price movements. While this influx of capital may have contributed to bitcoin's rally, it also adds risk to the market, because heightened leverage can amplify both gains and losses, increasing the likelihood of volatility in the near term.

Disclosure: An early draft of this article was edited by an AI tool, then further edited by CoinDesk staff prior to publication.

UPDATE (Sept. 26, 2024, 17:18 UTC): Belatedly adds disclosure.