Key Takeaways

• Willy Woo warns that now is a risky time for leveraged bets due to potential liquidation hunts.

• Bitcoin price prediction is complicated by excessive open interest and speculative derivatives trading.

• A potential market flush could cause high short-term volatility but pave the way for long-term gains.

• Rising M2 money supply supports the long-term bullish case for Bitcoin.

Bitcoin Price Prediction Hindered By Derivatives Frenzy

On June 2nd, prominent technical analyst Willy Woo issued a strong caution to traders, warning that now is a risky time to place “paper bets” on Bitcoin.

In his view, the Bitcoin market is vulnerable to what he calls “liquidation hunts,” with many speculators using high-risk strategies that could lead to significant downward pressure in the short term.

Bitcoin’s Open Value

Source: X (@woonomic)

Woo pointed out that the current trading landscape is crowded with “casino hitchhikers”, a term he uses to describe traders using leverage on crypto derivatives without holding actual BTC. These include instruments like futures, options, and perpetual contracts, which allow traders to bet on Bitcoin’s price direction with borrowed capital.

What Is A Liquidation Hunt?

A liquidation hunt happens when large players, or whales, intentionally move the market to trigger forced sales from over-leveraged traders. These events often occur in low-liquidity environments, like weekends or during summer months, when prices are easier to manipulate.

Woo referenced the recent $100 million liquidation of whale trader James Wynn on the Hyperliquid platform as a case in point:

“In neutral environments, it’s easy to move price. Now add incentives to make money through liquidations, it’s the perfect setup.”

This environment increases risk for traders trying to predict the next Bitcoin move using technicals alone.

Bitcoin Price Movement: A Calm Before The Storm?

As of early June, Bitcoin is consolidating after pulling back from its May 22nd all-time high. It touched an intraday high of $106,450 before settling around $105,350 in Asian markets on Tuesday morning.

This price action suggests a cooling-off period, but Woo warns that the market may not be out of the woods yet. If leveraged traders are flushed out, we could see increased volatility and possibly a deeper correction before Bitcoin resumes its upward trajectory.

Open Interest Near Record Highs

Supporting Woo’s warning is data from Coinglass, which shows that Bitcoin open interest (OI), a measure of active derivatives contracts, hit an all-time high of $80 billion on May 23rd. Although it has since decreased to $72 billion, the number remains historically high.

A surge in OI typically means the market is over-leveraged, and if Bitcoin’s spot price dips, a cascade of forced liquidations can occur. This dynamic not only leads to price crashes but also makes Bitcoin price prediction challenging and unreliable in the short term.

Is The Long-Term Bitcoin Price Prediction Still Bullish?

Despite the current risks, the long-term outlook for Bitcoin remains positive. One encouraging macroeconomic signal is the surge in the M2 money supply, which recently hit an all-time high.

M2 Money Supply Hitting A New ATH

Source: Barchart

This suggests more liquidity in the financial system, often a bullish sign for risk-on assets like Bitcoin. In the big picture, Woo seems to believe Bitcoin still has room to run—once the excessive leverage is purged from the system.

FAQ

Why is Bitcoin price prediction difficult right now?
The high levels of leverage and speculative trading in derivatives markets make Bitcoin’s short-term movements highly volatile and harder to predict.

What are “paper bets” in crypto?
Paper bets refer to futures, options, and other derivative instruments where traders speculate on price without holding the actual asset.

What is a liquidation hunt in crypto markets?
A liquidation hunt occurs when large traders manipulate the price to trigger the forced closing of leveraged positions, leading to a price drop.

How does open interest impact Bitcoin price?
High open interest indicates a large number of leveraged positions. If prices move unfavorably, it can trigger widespread liquidations, causing rapid declines.

Is Bitcoin still a good long-term investment?
Many analysts, including Woo, remain bullish long-term—especially given favorable macroeconomic conditions like the rising money supply.