BTC Open Interest Falls by $2 Billion as Liquidation Pressure Eases
- Open interest in Bitcoin futures fell from $44.8 billion to $42.8 billion.
- Reducing open interest reduces the risk of forced liquidation of Bitcoin positions.
- Traders expect Bitcoin volatility to decline following a drop in open interest in BTC futures.
Data from blockchain platform Glassnode shows that open interest in Bitcoin futures has fallen from $44.8 billion to $42.8 billion, while the price has fallen to $113,000, reflecting a reduction in speculative risk towards the cryptocurrency.
Analysts say fewer open contracts means less chance of forced liquidations, which often cause excessive volatility in fast markets.
Open Interest in BTC Futures on Glassnode
Why Open Interest Matters
Open interest represents the total number of active contracts in the market that have not yet been closed. In this context, this refers to unexploited Bitcoin derivatives, despite the cryptocurrency's recent price decline.
According to TradingView, Bitcoin's price fell more than 3% on Monday, extending the cryptocurrency's weekly loss to 5.44%. Traders typically use stop-loss orders to protect themselves from unlimited losses.
Related: 30-Day Bitcoin Price Forecast: New High or Further Correction?
They use it as a safety measure when the market moves against their preferred direction, especially during periods of increased volatility. The recent drop in BTC below $113,000 exemplifies this scenario, as the market triggered many users' stop-losses, resulting in the liquidation of $2 billion worth of Bitcoin, as noted above.
What does the drop in open interest mean for Bitcoin traders?
Analysts predict stability
Crypto analysts monitoring recent events are considering the recent drop in open interest in Bitcoin futures a blessing in disguise.
According to Glassnode's latest report, the price drop has reduced the potential for Bitcoin volatility in the near future, given the number of speculative trades closed due to the recent price drop. It's worth noting that most digital asset traders, especially retail investors with limited capital, prefer a more stable cryptocurrency market to a highly volatile one.
Market stability allows them to conduct analysis and trade cautiously in calmer market conditions, as opposed to the associated chaos during periods of high volatility when decision making becomes more difficult.
Market context
According to TradingView, Bitcoin has experienced a prolonged period of limited volatility since the beginning of September, beginning a steady rise and reaching $117,968 before falling back to $112,954 at the time of writing.
Related: Bitcoin Price Forecast: Analysts Expect $113K Rebound as CME Gap Confirms Support
Source: cryptonews.net
