Data from the GlassNode blockchain data and intelligence platform show that open interest on Bitcoin futures has fallen from $44.8 billion to $42.8 billion.
Analysts say fewer open contracts means less chances of forced liquidation, and in many cases triggers greater volatility in fast markets.
BTC futures are interested in GlassNode
Why open interest is important
Open interest represents the total number of active contracts in an unclosed market. In the immediate context, despite the latest price drops in cryptocurrencies, they are outstanding Bitcoin derivatives.
Bitcoin prices crashed more than 3% on Monday, extending Pioneer’s cryptocurrency pullback to 5.44% within a week, according to TradingView data. Typically, traders employ stop losses as part of their trading routines to protect against unlimited losses.
Related: 30 Day Bitcoin Price Prediction: New ATH or further revisions?
They adopt it as a safety protocol, especially during sophisticated volatility, when the market moves in the direction of their preference. The recent BTC crash exemplifies this scenario as the market caused many user outage losses, leading to $2 billion liquidation in the Bitcoin market mentioned above.
What does a decline in open interest mean for bitcoin traders?
Analysts look at stability ahead of time
Crypto analysts observing the latest developments consider the recent decline in open interest in Bitcoin futures a blessing for disguise.
According to a new report from GlassNode, the decline has reduced the likelihood of an extension of Bitcoin volatility in the near future, taking into account the number of speculative trades closed due to the latest price drops. It is noteworthy that most digital asset traders, especially retail investors with limited capital, prefer a more stable crypto market over a highly volatile version.
Market stability makes decisions more difficult, unlike the associated disruptions of very unstable periods, allowing analysis to be performed and trade carefully in milder market conditions.
Market context
Bitcoin has experienced limited extension volatility since the beginning of September, and has steadily risen to $117,968 before returning to trading at $112,954 at the time of writing.
Related: Bitcoin Price Prediction: Analyst Eye $113K Rebound CME Gap Anchor Support
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