Key Points
- Bitcoin’s declining Open Interest may suggest a lower appetite for leverage.
- Bitcoin’s liquidity share has been decreasing, indicating a possible shift of investment to altcoins.
Declining Interest in Bitcoin
Bitcoin [BTC] ended the last week of November with a significant drop in Open Interest. This could be indicative of a decrease in excitement around the leading cryptocurrency. It might also provide insights into its demand.
A recent analysis by CryptoQuant compares Bitcoin’s Open Interest, leverage appetite, and liquidations. The Open Interest peak during a euphoric rally suggested there were many long positions. This potentially set Bitcoin up for liquidations, which could have caused the pullback in the final week of November.
Bitcoin Liquidations and Liquidity
Bitcoin long liquidations peaked at $117.88 million last Monday as the price fell below $93,000. This was the second-highest level of liquidations in November. Open Interest has since decreased over the past week. As of 30th November, the cryptocurrency had $60.17 Billion in OI, a significant drop from the $64.03 billion OI on 22nd November. Despite this, the level of Open Interest remained high.
The previous euphoric rally had prompted many derivatives traders to execute leveraged longs. This could account for the peak liquidations at the start of last week as the price unexpectedly fell. The bearish outcome and liquidations also coincided with a substantial drop in the estimated leverage ratio.
Bitcoin’s Open Interest dip had an impact on its price action. Bitcoin retreated from its historic high of $99,800 to last week’s low at $90,742. However, it has since rebounded to a $96,532 press time price tag. Despite the slight weekly recovery, the spot market continued to show some demand. For instance, Bitcoin ETFs had over $320 million in the last 24 hours.
Despite this, it was apparent the momentum was significantly weaker compared to the third week of November. A potential reason for the slower momentum could be the declining Bitcoin dominance. The latter has been rallying steadily since the start of 2024.
It reached a 12-month peak at 61.53% on the 21st of November, but has since fallen to 47. Last week’s BTC dominance dip was the largest and most intense pullback it has experienced so far this year, confirming that its liquidity share has been declining.
As a result, less liquidity made its way into Bitcoin last week. This could be a sign that those with substantial profits are exiting BTC and investing into altcoins.
