- A look at why declining Bitcoin’s Open Interest could indicate lower appetite for leverage.
- Declining dominance signals lower excitement for Bitcoin.
As a seasoned crypto investor with years of experience navigating the volatile market, these recent trends in Bitcoin are noteworthy. The declining Open Interest and dropping dominance are signs that might suggest a shift in sentiment among investors.
Bitcoin (BTC) wrapped up the final week of November by experiencing a significant drop in Open Interest. This decrease suggests a recent decline in enthusiasm for the leading cryptocurrency, but it could also provide valuable information about market demand.
A recent CryptoQuant analysis draws comparisons between Bitcoin’s Open Interest, appetite for leverage, and liquidations. Notably, the Open Interest peak alongside a euphoric rally meant there were heavy longs.
A Bitcoin leveraged longs shakedown?
Setting up Bitcoin’s liquidation triggers led to the price drop observed in the last week of November.
As a result, long Bitcoin (BTC) liquidations reached a peak of $117.88 million on the previous Monday, when the price fell below $93,000. This was the second-highest amount of liquidations recorded in the month of November.
Over the past week, the Open Interest has noticeably decreased. To give you an idea, the cryptocurrency’s Open Interest was approximately $60.17 Billion on the 30th of November, a significant drop from the $64.03 billion it reached on the 22nd of November.
Nevertheless, the level of Open Interest was still high.
Since then, liquidations have dropped significantly. Earlier optimism had led numerous derivatives traders to make leveraged long positions.
Last week, the sudden drop in price could account for the high volume of liquidations at its onset, as this was an unanticipated movement.
The predicted decrease in value (bearish outcome) and forced sales (liquidations) coincided with a significant reduction in the calculated borrowing level (leverage ratio).
Is Bitcoin losing liquidity?
The decrease in Bitcoin’s Open Interest can be seen in its market behavior. After reaching an all-time high of $99,800, Bitcoin dropped to $90,742 last week, but it has since rebounded and is currently valued at approximately $96,532.
Even though there was a modest improvement each week, the market still showed signs of ongoing demand. To illustrate this, consider Bitcoin ETFs that accumulated over $320 million within the past 24 hours.
However, it was evident that the strength had significantly diminished compared to the third week of November.
One possible reason for the sluggish progress might be the decreasing influence of Bitcoin. Remarkably, its influence has been on a steady rise since the beginning of 2024.
It achieved a 12-month peak at 61.53% on the 21st of November, but has since dipped to 47.
Read Bitcoin’s [BTC] Price Prediction 2024–2025
Over the past week, Bitcoin’s dominance dip represented the most significant and forceful decline it has had this year, signifying a decrease in its market share of liquidity.
Consequently, reduced liquidity suggests that Bitcoin saw fewer transactions last week, possibly indicating that individuals who had previously made significant profits with Bitcoin were shifting their investments towards other cryptocurrencies, or altcoins.
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2024-12-01 12:07