Data shows the Bitcoin Open Interest has dropped by 25% following the crash to levels below $26,500, the largest drop in around 1.5 years.

Bitcoin Open Interest Has Plunged 25% After Price Plummet

As pointed out by an analyst in a CryptoQuant post, this open interest flush could lead to a bottom for the cryptocurrency. The “Open Interest” here refers to the total amount of Bitcoin positions (measured in USD) currently open on all derivative exchange platforms.

When the value of this metric rises, it means that the speculators are opening up new positions in the market currently. Generally, whenever new positions crop up on exchanges, the total leverage in the market also heads up.

A high amount of leverage can lead to instability in the sector, so when the Open Interest observes high values, the price of the asset becomes more probable to display some volatility.

On the other hand, the metric going down suggests some investors are closing up their contracts, or are possibly getting liquidated, which can lead to the cryptocurrency becoming more calmer as there a fewer positions open now.

Now, here is a chart that shows the trend in the percentage change of the Bitcoin Open Interest over the last couple of years:

Looks like the value of the metric has been quite negative in recent days | Source: CryptoQuant

As displayed in the above graph, the Bitcoin Open Interest percentage change has observed a very sharp negative spike as the plunge in the cryptocurrency’s value has occurred. This means that the indicator’s value has taken a deep hit in this volatile event.

The reason for this drawdown is naturally the fact that a large number of investors have found liquidation. Mass liquidation events like this one are popularly referred to as “squeezes.” In a squeeze, a large amount of liquidations suddenly gets t

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Author: Hououin Kyouma

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