“Now is a bad time to take paper bets on BTC,” said technical analyst Willy Woo on June 2.

He said it was “open season on liquidation hunts due to high levels of betting,” before adding that Bitcoin was “waiting to purge the bets before the next swing of all-time-highs.”

Paper bets are generally crypto derivatives such as futures, options, and perpetual contracts that allow speculators to bet on the price direction without ever holding the asset. Woo said spot Bitcoin prices are hard to move up with too many of these “casino hitchhikers” onboard.

NOW is a BAD TIME to take paper bets on BTC.

Its open season on liquidation hunts due to high levels of betting.

BTC is waiting to purge the bets before the next swing of all-time-highs.

Chart: paper bets on BTC, hard to move up with too many casino hitchhikers onboard. pic.twitter.com/bj9ikjdn8Q

Leverage Flush Imminent

Most derivatives gamblers use leveraged trading, which tends to overheat markets and create more volatility, especially when they get liquidated.

When asked about the $100 million liquidation of Hyperliquid whale trader James Wynn last week, Woo explained that the buying pressure was low last week, which means “whales can push things around.”

“In neutral environments, it’s easy to move price, especially weekends and summer months,” he said before warning:

“Now add incentives to make money through liquidations, its the perfect setup for liquidation hunts NOW.”

Bitcoin open interest (OI), or the number of open futures contracts that have yet to be settled, hit an all-time high of $80 billion on May 23, according to Coinglass. It has since fallen to $72 billion but remains elevated, indicating a high level of “paper bets” or leverage in the market.

When OI surges, it indicates that massive leveraged positions have built up with lots of speculators holding large positions with borrowed money.

When the spot price of BTC moves against these over-leveraged positions, traders get forcibly liquidated. These flushouts can create a cascade effect and amplify selling pressure, which can cause a sharp decline in prices and volatility spikes.

BTC Price Outlook

Bitcoin prices are up marginally on the day, hitting an intraday high of $106,450 before retreating to around $105,350 during Tuesday morning trading in Asia.

Since falling from its May 22 all-time high, the asset has remained in consolidation around current levels for the past few days. It looks very strong on the long-term view, but could see more volatility if Woo’s “casino hitchhikers” get liquidated.

Meanwhile, the M2 money supply has just hit an all-time high, which is good news for risk-on assets such as crypto.

M2 Money Supply hits new all-time high of $21.86 Trillion pic.twitter.com/YoFxMlRqjY