- A look at why declining Bitcoin’s Open Interest could indicate lower appetite for leverage.
- Declining dominance signals lower excitement for Bitcoin.
Bitcoin [BTC] just concluded the last week of November with a noteworthy dip in Open Interest. While this reflects on the recent slowdown in excitement around the king coin, it may also offer insights regarding demand.
A recent CryptoQuant analysis draws comparisons between Bitcoin’s Open Interest, appetite for leverage, and liquidations. Notably, the Open Interest peak alongside a euphoric rally meant there were heavy longs.
A Bitcoin leveraged longs shakedown?
This set Bitcoin up for liquidations that were responsible for the pullback in the last week of November.
Consequently, BTC long liquidations peaked at $117.88 million on Monday last week as price dipped below $93,000. This was the second-highest level of liquidations in November.
Source: Coinglass
Open Interest has since dipped over the last seven days. For context, the cryptocurrency had $60.17 Billion in OI on 30 November, a considerable drop from the $64.03 billion OI it achieved on the 22nd of November.
Nevertheless, the level of Open Interest was still high.
Source: CryptoQuant
Liquidations have since then dipped considerably. The previously euphoric rally had encouraged many derivatives traders to execute leveraged longs.
This would explain the peak liquidations at the start of last week as price unexpectedly pulled back.
The bearish outcome and liquidations also aligned with a considerable drop in the estimated leverage ratio.
Source: CryptoQuant
Is Bitcoin losing liquidity?
The dip in BTC’s Open Interest reflected on its price action. Bitcoin pulled back from its historic high of $99,800 to last week’s low at $90,742. However, it has since recovered to a $96,532 press time price tag.
Despite the slight weekly recovery, the spot market continued to demonstrate some demand. For example, Bitcoin ETFs had over $320 million in the last 24 hours.
But despite this, it was clear the momentum was notably weaker compared to the third week of November.
A potential explanation for the slower momentum could be the declining Bitcoin dominance. The latter has been rallying steadily since the start of 2024.
It achieved a 12-month peak at 61.53% on the 21st of November, but has since dipped to 47.
Source: TradingView
Read Bitcoin’s [BTC] Price Prediction 2024–2025
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.
Therefore, lower liquidity made its way into Bitcoin last week. This is perhaps a sign that those deep in profit are exiting BTC and investing into altcoins.
