The Great Deleveraging
From the November peak to today, BTC open interest is down a whopping 50% — and this is over the span of just a few weeks. There’s logic behind why open interest and its composition matter. Too many leveraged longs and a lack of spot buying is a sign that a market is peaking. When there’s nobody left to buy/long, price momentum to the upside is severely limited (the same applies to heavy shorting preceding bottoms). Wiping out some of this open interest gives the market a reset.
50% is not a small number, despite the fact that all market data in crypto looks whimsical to a portfolio manager at Goldman. While this doesn’t mean we’ve found a bottom with certainty, the probabilities over the mid-term are currently in favor of patient bulls. However, the most likely outcome is a sideways market for the next month or so, at least until the market finds its footing again.