Bitcoin suffered significant losses during the first week in December. Following liquidations this weekend, the digital asset took some of the biggest hits for the year. The amount of bitcoin open interest has seen a significant drop. After the dump, open interest in Bitcoin denominated bitcoin took a dive.
This significant drop in open interest led to close-record lows for 2021. The rapid decline in open interest was due to bitcoin’s loss of more than $10,000. It is concerning because open interest dropped recently and another decline does not bode well for the cryptocurrency market.
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Bitcoin Open Interest Records: Second-Largest Declination
Open interest fell to $40,000 after the price of future positions dropped from $54,000 down to $40,000 in some cases. Future positions were liquidated, opening the asset to further liquidations. Open interest fell 26% during this period. Arcane Research reports that BTC led open interest volumes, which fell from 390,000. BTC to 333,000.
BTC Open Interests sees shart decline | Source: Arcane Research
The market saw the 2nd-largest drop in open interests per day on Saturday, losing 58,000 BTC just one day. This represents the worst drop in open market interest over the past six months. It was last seen on May 19th when the market experienced a more severe decline, but it still saw an increase in open interests.
BTC-denominated open interests have fallen in correlation to the price drop. OI (openinterest) reached its peak in April at the height of bitcoin’s first bull rally, and has not been able to maintain that level despite bitcoin hitting a record high of $69,000 last week.
BTC prices drop to $49K due to another dip. Source: BTCUSD tradingview.com| Source: BTCUSD on TradingView.com
How did the decline occur?
Open interest fell due to violent market sell-offs following the Bitcoin price crash. These sell-offs led to market losses in excess of $1 trillion. Even though the futures markets have been brought back to health, they are still vulnerable.
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ByBit, Binance, and ByBit saw their share of open interest drop significantly due to massive deleveraging. The market’s share fell 11% between Binance and ByBit, putting them at 30%. Binance saw a 40% drop in OI and ByBit experienced a more severe decline of 45% in OI. Both exchanges have open interest of $3.3 billionaire, $1.6 million respectively.
Open interest for Bitcoin-denominated Bitcoins has not seen significant recovery since December 4, 2017. Open interest is currently at 325,000 BTC. That’s about 5,000 BTC below the Saturday 330,000 crash point.
Featured image taken from The Spruce. Arcane Research charts and TradingView.com charts.