Bitcoin may still have “more room to fall” as open interest has continued to rise amid recent price action, according to crypto analysis platform CoinGlass.
In an August 16th X post, CoinGlass highlighted that the total open interest (OI) for Bitcoin futures, representing the number of contracts that have yet to be settled, reached $29 billion and has been rising throughout the week.
This uptick in OI contrasts with the 5% decline observed from Bitcoin’s spot price over the past two days, a situation the platform described as “a bit unusual,” as the OI has not yet adjusted to reflect the price drop.
“An increase in open interest means that both long and short positions are increasing,” CoinGlass noted. Consequently, this adds more leverage to the market, which can amplify price movements in either direction.
Open Interest Figures Mirror Last Week’s Crash
Significantly, a similar setup triggered the dramatic 20% drop in the Bitcoin price on August 5th as leverage was flushed out.
Something CoinGlass highlighted as a case that Bitcoin could see further downside in the near term. The firm commented:
“I think there is room to fall.”
Additionally, CoinGlass data reveals that funding rates are currently negative. Negative funding rates occur when the price of the futures contract is trading below the spot price of the underlying asset.
This situation discourages traders from holding long positions due to the cost of maintaining them while incentivizing short positions, as traders might profit from the negative funding rates.
The end of the week also brings a significant crypto options expiry event, with approximately 24,000 Bitcoin contracts set to expire today, carrying a notional value of $1.4 billion, according to Deribit data.
Despite the size of this event, these expiries typically have a limited impact on spot markets.
Instead, the buildup of large leveraged positions tends to have a greater influence, particularly when those positions get flushed out, leading to heightened price volatility.
Low $40,000s Bitcoin Could Still Be On The Table
Notably, this development reaffirms recent bearish forecasts made by analysts, who believe Bitcoin could hit lower lows before the next substantial rally
Cane Island Alternative Advisors founder Timothy Peterson, in an X post, mentioned that “$40k and $80k are equally likely in the next 60 days.”
Similarly, Markus Theilin, CEO of 10x Research, identified the “low $40,000s” as an ideal entry point for bulls to re-enter the market.
However, there remains division in opinions on whether Bitcoin will see another significant downward move or continue its long-term recovery.
Despite the uncertainty, investor confidence in Bitcoin seems to be gradually returning after its recovery since last week’s crash. According to the latest report from analytics firm Glassnode, Bitcoin owner behavior is shifting back towards HODLing.
This trend signals that the market may have entered an accumulation phase, where long-term holders are quietly buying and storing Bitcoin, anticipating future gains. This shift could bolster the case for a more sustained recovery in the coming months.
With the market currently digesting the largest #Bitcoin downtrend of the cycle, indecision amongst digital asset investors remains apparent.
However, below the surface, a distinct return to HODLing and accumulation appears to be underway.
Discover more in the latest Week… pic.twitter.com/dtyrv8dVqz— glassnode (@glassnode) August 13, 2024
The post Bitcoin Has “Room to Fall” Amid Rising Open Interest: CoinGlass appeared first on Cryptonews.
