The Bitcoin market has been mired in uncertainty over the past few weeks following unusually negative performance in October. While general market sentiment suggests the end of the bull cycle is near, the latest on-chain data suggests that the top cryptocurrency may just be experiencing a reset. The recent slump appears to be setting the stage for the coin’s next major move, according to a report from the blockchain company.
BTC is not in cycle exhaustion phase: XWIN
In the latest Quicktake post on the CryptoQuant platform, XWIN Research Japan stated that Bitcoin’s current situation is closer to a restructuring phase rather than the end of a cycle. The DeFi firm believes market fundamentals are resetting after liquidating excessive leverage in recent weeks.
Supporting the claim of reduced leverage, XWIN Research highlighted that open interest on the Bitcoin futures market has decreased significantly since the end of October. This decrease in open interest is a signal for short-term traders to exit leveraged positions.
The blockchain company noted that at the peak of past cycles, leveraged trading often increased even at high price levels. However, this happy market positioning is not currently the case for Bitcoin, meaning that a cycle peak is unlikely to be witnessed.
Source: CryptoQuant
Additionally, XWIN Research Japan said that Bitcoin price is currently lacking momentum and is not missing structural support. The blockchain company pointed to declining demand from U.S. institutional investors, highlighted by the negative Coinbase Premium Index, as one of the reasons for the lack of momentum.
As of this writing, Bitcoin’s value is around $101,930, reflecting no significant movement over the past 24 hours. However, the flagship cryptocurrency has been in the red on weekly time frames, suffering an 8% price drop over the past seven days.
Bitcoin Market Shows Both Strengths and Weaknesses
Despite weakening institutional demand for BTC, XWIN Research highlighted several positive signs that could contribute to the cryptocurrency’s ultimate recovery. For example, DeFi companies are reporting that Bitcoin exchange reserves are at their lowest levels in years, meaning there is still a limited supply available.
Additionally, stablecoin liquidity is gradually flowing back into the market. This means that purchasing power is also recovering and investors are waiting for the right time. However, XWIN Research noted that despite the apparent market resilience, current sentiment suggests a near-term range-bound move.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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