- A look at why Bitcoin’s declining open interest could indicate lower demand for leverage.
- Declining dominance indicates lower excitement for Bitcoin.
Bitcoin [BTC] has just ended the last week of November with a notable dip in Open Interest. While this reflects the recent slowdown in excitement surrounding the King Coin, it may also provide insights into demand.
A recent one CryptoQuant Analysis draws comparisons between Bitcoin’s open interest, appetite for leverage, and liquidations. In particular, the Open Interest peak and a euphoric rally resulted in heavy longs.
A long shakedown leveraged by Bitcoin?
This exposed Bitcoin to liquidations that were responsible for the pullback in the last week of November.
Consequently, BTC long liquidations peaked last Monday at $117.88 million, while the price fell below $93,000. This was the second highest level of liquidations in November.
Source: Coinglass
Open Interest has since fallen over the past seven days. For context, the cryptocurrency had $60.17 billion in OI as of November 30, a significant drop from the $64.03 billion OI it achieved on November 22.
Nevertheless, the level of Open Interest was still high.
Source: CryptoQuant
The number of liquidations has fallen significantly since then. The previously euphoric rally had prompted many derivatives traders to execute leveraged long positions.
This would explain the peak liquidations at the beginning of last week when the price unexpectedly pulled back.
The bearish outcome and liquidations also coincided with a significant decline in the estimated leverage ratio.
Source: CryptoQuant
Is Bitcoin Losing Liquidity?
The dip in BTC’s Open Interest reflected its price action. Bitcoin retreated from its all-time high of $99,800 to last week’s low of $90,742. However, it has since recovered to a price tag of $96,532 per press.
Despite the slight weekly recovery, some demand remained on the spot market. For example, Bitcoin ETFs were worth more than $320 million in the last 24 hours.
But despite this, it was clear that momentum was significantly weaker compared to the third week of November.
A possible explanation for the slower momentum could be declining Bitcoin dominance. The latter has been steadily rising since early 2024.
It reached a twelve-month peak of 61.53% on November 21, but has since fallen to 47%.
Source: TradingView
Read Bitcoin’s [BTC] Price forecast 2024–2025
Last week’s dip in BTC’s dominance was the largest and most intense pullback it has experienced so far this year, confirming that its liquidity share has declined.
That’s why lower liquidity made its way to Bitcoin last week. This may be a sign that those who make a lot of profits are leaving BTC and investing in altcoins.
