Bitcoin Open Interest Has Dropped 35% Since BTC's All-Time High, Suggesting Shifting Market Dynamics

Bitcoin Open Interest in the futures market has slumped 35% since the asset's all-time high, as downward pressure persists.

Bitcoin (BTC) open interest in the futures market has slumped 35% since the asset’s all-time high (ATH), as the crypto faces difficulties reclaiming the $90,000 psychological level.

For context, Bitcoin has struggled to sustain gains after reaching an all-time high (ATH) of over $109,000 in January.

Despite the new all-time high, BTC has faced difficulties reclaiming the $90,000 psychological level, remaining stuck below it for nearly two weeks.

This downturn has sparked discussion over whether the current bull market has ended or if a new rally could push BTC to fresh highs.

Amid this uncertainty, recent data from Glassnode sheds light on major shifts in market conditions.

One notable development is a sharp decline in Bitcoin open interest, which has fallen from $57 billion at Bitcoin’s ATH to $37 billion. This decline represents a staggering 35% drop.

This metric measures the total value of outstanding derivative contracts, suggesting a massive reduction in speculative trading and hedging activity.

What Does Bitcoin Open Interest Say About BTC?

According to Glassnode, this crash in Bitcoin open interest is part of a broader liquidity on-chain.

This signals a strong risk-off sentiment among investors.

Additionally, the unwinding of the cash-and-carry trade, which traders use to capitalize on the price differential between spot and futures markets, suggests a weakening long-side bias.

This is part of a broader shift in positioning, as evidenced by ETF outflows and CME futures closures, which are placing additional selling pressure on Bitcoin’s spot market.

However, it’s important to note that ETFs typically have lower liquidity compared to futures, which could amplify short-term volatility in the market.

Another key on-chain metric highlighted by Glassnode is Hot Supply. This metric, which tracks BTC coins held for one week or less, has slid from 5.9% of circulating supply to just 2.8%. This marks a reduction of over 50% in the past three months.

The decline in Hot Supply signals that fewer newly acquired coins are being traded, ultimately decreasing the supply of liquid Bitcoin.

Complementary to this trend, exchange inflows have also decreased significantly from 58,600 BTC per day to 26,900 BTC, showcasing a 54% reduction.

While lower inflows indicate less sell-side pressure, the decreased volume suggests weaker demand, as fewer coins are being moved to exchanges for trading activity.

Bitcoin’s Price Today, March 21

Currently, Bitcoin is trading at $85,225, attempting to maintain stability above the $85,000 support level.

A market commentator known as “Unknown Trader” points out that Bitcoin closed above $85,000, an important level needed to sustain upward momentum.

The crypto analyst, who is followed by over 66,000 on X, also notes that the price closed above the daily 200-day moving average, which is historically a bullish signal.

According to the trader, Bitcoin is now retesting the $85,000 level. If it holds, he expects an upward move toward the $90,500-$92,441 resistance area.

However, once BTC reaches this level, the trader anticipates a rejection and a subsequent retest of the $85,000 area.

Meanwhile, CryptoQuant analyst Woominkyu highlights a potential accumulation phase by U.S. institutional investors.

The analyst notes that the 30-day EMA of the Coinbase Premium Index is attempting to cross above the 100-day EMA.

Similar crossovers in the past have typically been followed by surges in price, suggesting that whales and institutional players may be engaging in significant buying activity, which is pushing up the Coinbase Premium Index.

As explained by Woominkyu, a rising Coinbase Premium Index signifies stronger institutional buying pressure, as they prefer trading on Coinbase Pro due to its high liquidity and ability to handle large trades without impacting the market price.

If this trend persists, it could drive further upside in Bitcoin’s price, potentially extending the ongoing bull market rather than signaling its end.