Over the past two weeks, the world’s leading cryptocurrency has struggled to test the $106,000 support while clearly surpassing the $116,000 price mark. With Bitcoin consolidating around $110,000, the latest on-chain analysis presents an interesting outlook despite the recent price struggle.
Why Bitcoin Price Could Expand Soon
In a QuickTake post on the CryptoQuant platform, cryptocurrency research firm The agency’s optimistic guess relies on readings from three important on-chain indicators:
First, XWIN Research Japan highlights a sharp decline in open interest across futures exchanges since reaching its peak in September. For context, open interest is the total number of futures or options contracts outstanding that have not been settled or terminated.
A sharp decline in open interest typically indicates an event called a “leveraged wipeout,” where speculative positions are driven out of the market. Historically, simultaneous declines in open interest along with cryptocurrency prices have often resulted in market resets, which have typically preceded sustainable price increases due to increased spot demand.
Education and research organizations also refer to the Expense Output Profit Ratio (SOPR) indicator, which tracks whether investors primarily sell at a profit or loss. SOPR is known to have found stability around 1.0. This means that most Bitcoin traders are trading around a cost basis. Furthermore, this points out that traders neither make significant profits nor suffer large losses.
According to XWIN Research, this is a good sign that the previous capitulation phase is over and reflects long-term holder demand absorbing short-term holder supply.
As all of this unfolds beneath the surface, XWIN Research also assumes that liquidity may be building up for the benefit of the flagship cryptocurrency. According to the agency’s report, the total supply of stablecoin ERC-20 has reached an all-time high of approximately $158.8 billion. The cryptocurrency research firm speculates that as market sentiment improves, up to $158 billion in ERC-20 could sit on the sidelines to contribute to upward pressure on Bitcoin prices.
Bitcoin Price Overview
As of this writing, Bitcoin is worth about $109,918, showing a slight increase of 0.22% over the past day, according to data from CoinMarketCap.
Featured image from Pexels, chart from Tradingview
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