Bitcoin’s plunge to $ 42,000 wiped out its open interest and eliminated a large number of leveraged traders, but analysts say dumping open interest is often a great buying opportunity.
The weekend is just around the corner and fear remains the predominant short-term sentiment in the cryptocurrency market. The bitcoin (BTC) price fell to $ 47,250 this morning and investors were biting their nails after US CPI data showed inflation hit a four-year high of 6.8%.
Data from Cointelegraph Marketplaces Professional and TradingView show that the midday push of the bulls on the return of the $ 50,000 support level was manually defeated and sellers brought the price back below $ 48,000, which could trigger a new daily high for the premium cryptocurrency.
BTC / USDT 4-hour chart. Source: TradingView
With the prospect of a major rally towards the end of the year, traders turned their attention to risk management and identifying the best buy levels. This is what analysts say about the outlook for Bitcoin in 2022.
Deleting open settings “makes things easier”
As shown in previous cases, when the price of BTC fell rapidly, the open interest (OI) for BTC on derivatives exchanges dropped significantly, as highlighted in a recent report by Delphi Digital. The report noted a 50% reduction in open positions following the recent market downturn as overly indebted long positions were liquidated.
BTC futures open interest versus BTC price. Source: Delphi Digital
While the experience can be inconvenient for overly open traders, analysts say eradicating such events is beneficial in the long term and often “giving way” to further growth as old excesses and excesses are replaced by a more balanced trading environment.
Delphi Electronic said the sharp drop in open interest last month could also indicate that Delphi Digital says there may be a near-term low for BTC on its way and that the current sell-off could be exhausted.
Delphi Electronic said:
“The 30-day decline in the% of open interest in BTC has reached a level that previously signaled a bottom (or not too far).”
Trade BTC within range until 2022
According to Ben Lilly, co-founder of Jarvis Labs, the price of bitcoin is likely to “remain in this trading range for at least the end of the month,” mainly because December 31 is “of greatest open interest” under open contracts. ”
Lilly drew attention to previous major price drops that led to large liquidation volumes, and explained that the market often takes time to gain momentum after these drops.
Open Interest BTC Futures. Source: espresso
“Fortunately, this is a great setup for anyone looking to accumulate money weekly or at the bottom of their current trading range.”
On the subject: Trader Cites Bitcoin Price Drop in 2017 Raises Double Top Concerns
Should traders look for a continuation of the uptrend?
Twitter analyst and pseudonym Rekt Capital, sent In the following chart, the BTC price is trading between two major exponential moving averages.
1 week BTC / USD chart. Source: Twitter
Right money said
“Overall, BTC is currently consolidating under two major EMAs. Exactly the same as May 2021. And just like May … Strong price stability and consolidation between the two EMAs should lead to a continuation of the new macroeconomic uptrend. ”
The total crypto market capitalization is currently $ 2.238 trillion, with Bitcoin dominance at 40.7%.