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Data shows that the Bitcoin -Futures market has recently seen an enormous Deleveraging event. This is what this reset could mean for BTC, based on trends from the past.
Bitcoin Open Interest recently completed a crash
As noted by an analyst in a cryptoquant quicktake afterThe BTC Open Interest has recently seen a retest. The “open interest” refers to an indicator that keeps track of the total amount of futures positions with regard to Bitcoin that are currently open on all derivatives fairs.
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When the value of this metric rises, this means that investors open more positions on the market. In general, the total leverage in the sector goes up when this happens, so this type of trend can lead to more volatility for the active.
On the other hand, the indicator that goes down implies the Futures users who close positions or are forced to be liquidated by their platform. As the leverage decreases after such a trend, the market can work in a more stable way.
Now, here is the graph that is shared by the analyst, who shows the trend in the Bitcoin Open Interest, as well as the 90-day percentage change in recent years:
As shown in the graph above, the Bitcoin open interest in January shot up to a new all times of $ 33.6 billion out of $ 33.6 billion. Interestingly, this peak in the indicator coincided with the ATH in the price itself.
As mentioned earlier, an increase in open interest can lead to volatility for the cryptocurrency. The reason behind this lies in the fact that a mass -reading event, popularly known as a squeeze, can become more likely to act when the market is surpassed.
In such an event, a sharp swing in the price causes a large amount of simultaneous liquidations, which ultimately act as fuel for the movement itself, thereby extending the length. This unleashes a cascade of further liquidations. The volatility that comes from an increase in open interest can in theory Bitcoin can take in both directions. During the earlier bull rally, the increase in open interest was accompanied by Bullish Momentum.
From the graph, however, it is visible that the indicator reached a turning point around the time of the aforementioned peak. While Bearish Momentum Bitcoin took over after the ATH, it was now the turn of the bulls to be liquidated. The enormous long presses that cause price buns helped to continue the price decline, explaining its sharpness.
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Nowadays, the open interest rate has fallen to just $ 23.1 billion, with the 90 -day change of the indicator at a remarkable low of -14%. In the graph, De Quant emphasized the previous Deleveraging events in which the metric dropped in a similar way.
“Looking at historical trends, every past has offered delevering if these good opportunities offered the short to medium term,” the analyst notes. It is still to be seen whether this cooldown in the Futures market will be sufficient for Bitcoin to see a rebound or not.
BTC price
At the time of writing, Bitcoin acts around $ 83,500, an increase of 1% in the last 24 hours.
Featured image of Dall-e, cryptoquant.com, Graph of TradingView.com
