Bitcoin resistance at $120K normal due to ‘frothy’ open interest near all-time highs

Bitcoin printed its first notable bearish signal on the daily chart since early May, forming a bearish engulfing candle confirmed by a shooting star pattern. This comes after a 19% rally over the past 21 days, possibly signaling exhaustion.

Data from CryptoQuant highlighted that the Miners’ Position Index (MPI) surged above 2.78, its highest level since November 2024. The MPI measures how much Bitcoin miners send to exchanges relative to its one-year average. A high reading suggests an increased likelihood of selling. While this may add short-term pressure, the spike remains well below levels typically seen near bull market tops.

Adding to this cautionary outlook, realized profit and loss (P&L) from BTC deposits to centralized exchanges hit an all-time high of $9.29 billion, signaling aggressive profit-taking. Crypto analyst Crazzyblockk explained that these metrics point to a high-risk zone where short-term volatility may intensify, even as the broader bullish trend remains intact.

Meanwhile, trading platform Hyblock Capital noted that Bitcoin open interest is “approaching frothy levels.”

Bitcoin’s recent dip triggered a wave of panic selling, with nearly 50,000 BTC offloaded at a loss within 24 hours, according to Bitcoin researcher Axel Adler Jr. This sharp reaction underscored investor anxiety following BTC’s decline from recent highs.

However, data suggests the pullback was met with stronger buying interest. Bitcoin’s cost basis distribution heatmap shows that investors accumulated over 196,600 BTC, worth more than $23 billion, between $116,000 and $118,000. Thus, despite signs of fear-driven selling, the substantial dip-buying underscores continued market confidence and conviction in Bitcoin’s longer-term trajectory.

From a technical perspective, Bitcoin remains firmly within its bullish long-term structure as long as it consolidates above the $112,000 level. Following a 19% rally, a period of sideways movement or a minor pullback is a healthy reset, allowing the market to cool off, flush out excess leverage, and shake out weaker hands.

While the recent bearish engulfing pattern may signal short-term exhaustion or a potential reversal, it does not yet invalidate the broader uptrend. As long as key support levels hold around $112,000, the probability of BTC resuming its upward momentum remains high.