Bitcoin open interest has shown a sharp decline in line with the price decline over the past month, a development that analysts say could be an early indication that the market is forming a bottom before starting a new upward trend.
Data from CryptoQuant shows Bitcoin open interest has recorded its sharpest drop in 30 days, around 1.3 million BTC, with a current value estimated to reach $114 billion when Bitcoin is trading around $87,500.
Analysts describe the situation as a significant phase of ‘market clearing’.
The decline in Bitcoin price over the past few weeks has also triggered a wave of position liquidations, forcing traders to adjust strategies or reduce their risk exposure in the futures market.
This situation shows that investors are now more cautious and tend to stop excessive speculative activities.
According to Darkfost, the last time Bitcoin open interest fell at such a rate was during the 2022 ‘bearish’ market, thus highlighting the importance of the current correction phase in rebalancing the market structure.
Overall, Bitcoin has fallen by around 20% over the past month and is down more than 30% from its peak of over $126,000 reached almost two months ago in early October.
Meanwhile, crypto analyst and founder of MN Fund, Michaël Van de Poppe, believes the coming weeks will be the key determinant of Bitcoin’s direction. According to him, if BTC can surge and sustain in the $90,000 to $96,000 range, the potential for a new all-time high will increase significantly.
He also pointed out that the high level of fear and panic in the market currently tends to occur near the base zone, thus opening up the opportunity for a price recovery if technical support is successfully defended.
