Bitcoin’s recent $12B open interest wipeout was essential, says analyst
Bitcoin is experiencing a significant shift, marked by a nearly $12 billion drop in open interest earlier this month. This sharp decline in Bitcoin’s open interest (OI), which measures the total number of unsettled derivative contracts like options and futures, may serve as a critical turning point for the cryptocurrency, indicating a potential rebound.
According to a report from CryptoQuant contributor DarkFost, this occurrence can be interpreted as “a natural market reset” vital for ongoing bullish momentum. DarkFost emphasized that historical patterns indicate similar delveraging events have often created strategic opportunities for traders in the short to medium term. On February 20, Bitcoin’s OI was a robust $61.42 billion before plummeting to approximately $49.71 billion by March 4—a stark 19% decrease.
At the time of writing, Bitcoin’s OI stands at about $49.02 billion, per CoinGlass data, reflecting a modest recovery. This volatility has coincided with intense price fluctuations influenced by political and economic uncertainties, most notably the tariffs implemented by US President Donald Trump and concerns regarding upcoming interest rate adjustments.
The pivot caused a significant liquidation of leveraged positions within the market. Specifically, between February 25 and February 27, Bitcoin’s price fell below crucial thresholds, retracing beneath $90,000 before subsequently slipping below the $80,000 mark for the first time since November. Presently, Bitcoin trades around $83,400 according to CoinMarketCap, having faced a 14.58% decrease over the previous 30 days.
Ryan Lee, chief analyst at Bitget, commented on the current landscape, highlighting that Bitcoin’s price and OI are poised for further volatility, particularly in light of the Federal Open Market Committee’s upcoming meeting on March 19. While the market largely anticipates that the Federal Reserve will maintain stable interest rates, unexpected hawkish signals could exert downward pressure on Bitcoin and other risk assets.
Currently, market speculation indicates a 99% probability that the Fed will hold rates steady, as inferred from the CME Group’s FedWatch tool.
The current data reveals that Bitcoin’s OI has gained approximately 6.5% over the past five days, underscoring a dynamic market environment and potential for renewed investor interest as traders assess the implications of regulatory and macroeconomic developments on the cryptocurrency landscape.
In the broader context of the market, this shakeout may not signal the end of Bitcoin’s four-year cycle, as suggested by various analysts, thereby offering a complex panorama for traders as they navigate the fluctuating tides of the crypto space.
