Bitcoin (BTC) Faces Short-Term Correction as Monthly Chart Nears Bullish Engulfing Pattern

Bitcoin's (BTC) monthly price chart is less than 48 hours away from completing a bullish engulfing pattern for the first time in more than 18 months.

Bitcoin’s BTC monthly price chart is less than 48 hours away from completing a bullish engulfing pattern for the first time in more than 18 months.

As it stands, BTC’s 1-month candle began on Sept. 11 at $44,663. Since then, Bitcoin has rallied to a high of $73,633 before a local pullback to $65,679.

Bitcoin 1-month price chart. Source: TradingView

This recent price action, if sustained until the monthly candle close, would mark a strong bullish reversal from the lower price wick formed in August.

Moreover, this 1-month engulfing pattern could also mark the local bear market bottom, considering that the last time this occurred was in January 2023, signaling the bear market low of 2022.

Bitcoin OI retests $35B as funding rate stays flat

After a local bottom at $52,150 on Sept. 6, Bitcoin’s parabolic uptrend entailed breaking past the prior lower-high pattern to facilitate a higher-high trend.

In the meantime, Bitcoin open interest (OI) has increased rapidly, reaching as high as $35 billion on Sept. 27. This is on par with previous OI tops in 2024, witnessed during February and July 2024.

Bitcoin funding rate and open interest chart. Source: Velo.data

While open interest indicates that the futures market remains heavily involved in dictating price movement, a comparatively flat funding rate indicates perpetual traders are still “indecisive.”

Adam, a popular independent trader, highlights this particular instance and points out another key factor of spot orderbook depth being skewed to the sell side.

Bitcoin spot orderbook negative depth by Adam. Source: X.com

In other words, spot traders are currently selling aggressively into $66K resistance.

Thus, BTC's chances of downside market volatility remain high in the coming week.