Now is a really, really rough patch for bitcoin. As the entire crypto market faces a profound price correction, there is an unprecedented increase in open interest. The popular digital asset has since endured a massive market correction. Now, analysts are sifting through the rubble to get a clearer picture of what’s driving it in that direction. The combination of declining prices and substantial open interest raises questions about the potential for further corrections or a possible recovery.
The Bitcoin open interest is just $56.17 billion. This is an increase over last quarter, which reached an all-time high of $71.85 billion, it is still an extremely elevated level. Speculators are making hefty inferences on the crypto asset. This would be a sign that there is robust conviction continuing to build in this leading cryptocurrency by market capitalization. For the positive, this high open interest could be an obstacle to a full recovery. Looking at history, Bitcoin’s biggest price rallies have happened during low open interest periods.
Price Decline and Trendline Break
Only a few months later bitcoin skyrocketed to a record level above $109,000. It has since tanked over 20%, violating important trendline support in the low $80,000s. This decrease has caused one crypto analyst to predict a 20% decrease. Recently, the same analyst has provided bullish arguments as to why the BTC price is about to crash down from here.
We’ve put the target at $69,149, which is currently an all-time high from 2021.
"This level coincides with the intersection of the mid-channel support line and horizontal price structure." - The analyst
Bitcoin’s open interest is at all time highs, which might make any recovery impossible for the struggling Bitcoin price. The Relative Strength Index (RSI) is indicating a possible bullish divergence. The price action hasn’t played along with this bullish signal, leading to fears over the strength of any potential upside momentum. Bitcoin’s open interest indicates that traders are still taking very large and aggressive positions within the volatile digital asset.
Open Interest as a Hindrance
Futures open interest today is about 77% of its all-time highs. That said, it is historically high in the context of the past data. The Bitcoin open interest has declined nearly 22% from its all-time high of $71.85 billion. This reiterates that passion for the original cryptocurrency by market cap is still overflowing.
The on-going market conditions add an uncertain twist to this optimism—in both positive and negative ways. The high open interest, coupled with the recent price decline, suggests that the cryptocurrency may face challenges in the short term. The Bitcoin price has had its biggest upward moves when the open interest has been low.
Market Outlook and Potential Scenarios
Investors and traders alike would do well to continue keeping a close eye on price action, open interest changes, and other technical indicators to inform bullish or bearish decisions. In fact, the RSI is setting up for a potential bullish divergence yet the price action just isn’t backing that up. Whether or not Bitcoin can ultimately clear these hurdles and get back on its bull run, only time will tell.
Investors and traders should closely monitor price movements, open interest fluctuations, and other technical indicators to make informed decisions. The RSI may be showing a bullish divergence but the price action isn’t following it. Whether Bitcoin can overcome these hurdles and resume its upward trajectory remains to be seen.
