Bitcoin's open interest in derivatives has plummeted, prompting analysts to predict potential market reversals amid ongoing bearish sentiment.
Recent data from CryptoQuant indicates that Bitcoin's open interest in derivatives has fallen to its lowest point since late 2022, raising concerns among traders. Analyst Arab Chain noted that such low levels often precede consolidation or bullish reversals, especially if the price stabilizes.
“Historically, reaching similar levels since 2022 has preceded periods of consolidation or even bullish reversals,” said Arab Chain.
The decline in open interest has been most pronounced on Binance, where approximately 1.53 million BTC was liquidated, followed by Bybit at 784,000 BTC, Gate at 505,000 BTC, and OKX at 395,000 BTC. Other exchanges like Deribit, Bitfinex, and HTX Global also reported similar reductions, indicating a broad market trend rather than isolated incidents.
This trend has been characterized by Arab Chain as a phase of "deleveraging," signifying a widespread liquidation of leveraged positions. Currently, Bitcoin's price hovers around $90,700, reflecting a slight increase of 0.1% over the past day, though it recently dipped to $90,150 after failing to maintain levels above $94,000.
Glassnode highlighted several critical price levels for Bitcoin, including a base cost for short-term holders at $98,900, an average price for active investors at $87,700, and a realized price of $56,000.
Options Market Insights
On January 9, options worth $2.4 billion expired, accounting for 7% of the total open interest. The put-call ratio for Bitcoin stood at 1.07, with a maximum pain point at $90,000, while Ethereum’s ratio was 0.88 at $3,100, indicating bearish sentiment in the market.
Implied volatility for Bitcoin has stabilized around 40%, with Ethereum's dropping to 55%. Experts observed a general weakening in the downward trend, with a high percentage of block trades (70%) suggesting that market makers are accumulating cash reserves. Analysts noted that the current strategies seem to favor monthly call options for Bitcoin and put options for Ethereum, indicating differing expectations for the two cryptocurrencies.
“Their main strategic positions are currently focused on monthly call options for Bitcoin and monthly put options for Ethereum,” experts noted.
Moreover, analysts at JPMorgan have suggested that the crypto market may be nearing a bottom, potentially signaling the end of the current sell-off rather than the onset of a new downward trend.
