Bitcoin could be poised for further decline as open interest in Bitcoin futures continues to rise despite recent price drops, according to analysis from crypto platform CoinGlass.
In an August 16 post on X, CoinGlass reported that open interest (OI) for Bitcoin futures—representing unsettled contracts—has reached $29 billion, climbing steadily throughout the week. This increase in OI stands in stark contrast to the 5% dip in Bitcoin’s spot price over the past two days, an unusual scenario that suggests OI has not yet adjusted to the price decline.
Rising Open Interest Suggests Increased Market Leverage
CoinGlass noted that the rise in open interest indicates a simultaneous increase in both long and short positions, adding leverage to the market. This heightened leverage can amplify price movements, potentially leading to significant volatility in either direction.
A similar pattern of rising open interest and increased leverage preceded Bitcoin’s dramatic 20% price drop on August 5, a situation that CoinGlass suggests could recur, indicating that Bitcoin might have “room to fall” further.
Negative Funding Rates and Options Expiry Could Add Pressure
CoinGlass also highlighted that current funding rates are negative, meaning the price of Bitcoin futures contracts is trading below the spot price of Bitcoin. This discourages long positions while incentivizing short positions, further adding downward pressure on Bitcoin’s price.
Adding to the market’s complexity, approximately 24,000 Bitcoin contracts, with a notional value of $1.4 billion, are set to expire today. While options expiries typically have limited impact on the spot market, the large buildup of leveraged positions could lead to heightened volatility, particularly if those positions are forced to liquidate.
Analysts Predict Potential for Lower Bitcoin Prices
Recent market developments align with bearish forecasts from analysts, who suggest that Bitcoin could still drop to lower levels before experiencing a significant rally. Timothy Peterson, founder of Cane Island Alternative Advisors, suggested in a recent post that Bitcoin could reach as low as $40,000 or as high as $80,000 within the next 60 days. Similarly, Markus Theilin, CEO of 10x Research, identified the “low $40,000s” as an ideal entry point for bullish investors.
Market Sentiment Shifts Toward Accumulation Phase
Despite the bearish outlook from some quarters, there are signs that investor confidence in Bitcoin is gradually returning. According to a report from analytics firm Glassnode, Bitcoin owner behavior is shifting back toward “HODLing,” indicating that long-term holders are accumulating Bitcoin in anticipation of future gains. This trend could signal the start of an accumulation phase, potentially supporting a more sustained recovery for Bitcoin in the coming months.
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