Let us check the Bitcoin. Open and Volume interest in Bitcoin futures have been in steady decline. Nevertheless, it can help catalyze the next rally.
BTC futures volume and open interest are declining rapidly. Bitcoin futures volume has dropped by sixty percent from over $25 billion to around 10 billion dollars since September. That is what data shows.
While the decline in trading activity could ostensibly seem like a negative metric, it can also indicate that a bull cycle is emerging.
The futures of the Bitcoin market represent most of the overleveraged trades in the Bitcoin market. Thus, popular platforms like ByBit, Binance, and BitMEX enable leverage of up to 125x.
Traders are vulnerable to liquidation when they are highly leveraged. For example, if a 10x long contract placed at $10,000 translates to nine-thousand dollars, it forces the buyer to market-sell the position.
There are many traders in similar positions. Thus, it increases sell pressure and might catalyze a major sell-off in Bitcoin price.
If the volume spike and future market open interest, it will put Bitcoin in a vulnerable position. Thus, it will raise the probability of cascading liquidation like those seen amid the infamous black Thursday. On that day, over one billion dollars’ worth of futures contracts were liquidated. It happened because the Bitcoin price plunged below $3,600.
The drop in futures volume can be a potentially bullish event. Typically, a small price movement can turn into a significant price swing if mass liquidations are triggered at a certain price level.
Open interest and the declining volume of the future market can set the stage for a prolonged and stable rally to take form.
Moreover, there are often multiple spikes in open interest during bull markets.
Nevertheless, the market stays neutral for a prolonged period. Thus, it allows spot volume to pick up.
That is the current news of the Bitcoin.