Cryptocurrency markets look blood red due to the collapse led by Bitcoin (BTC) in recent weeks. According to some analysis, we may have come to the end of this decline led by BTC. A metric and its analysis on which these analyzes base their claims cryptocoin.com‘in.
Are we near the end of the decline in Bitcoin (BTC)?
According to this metric, Bitcoin may be close to hitting the bottom of its ongoing collapse. IntoTheBlock, known for its analysis of the cryptocurrency markets, suggested in a recent tweet that a possible “Bitcoin short squeeze” system may be in operation. The company’s analysis is based on the ratio of BTC’s “open interest” to the market cap of the flagship cryptocurrency. “Open interest” is the total number of futures contracts held by market participants at the end of the trading day. Analysis claims that Bitcoin’s open interest has recently reached a one-year peak of roughly 2.25%.
Bitcoin futures, representing all outstanding contracts held by traders, recently hit a new record high of $16.68 billion, with crypto giant Binance accounting for 28.86% of the total, according to data provided by Coinglass. IntoTheBlock reminds us that the OI/MC ratio has also increased on the background of falling BTC prices in July 2021, when Bitcoin dropped to $29,400 before continuing its uptrend. Therefore, the analytics firm expects a similar scenario to happen this time around.
Potential short squeeze ahead
the ratio of #Bitcoin‘s open interest relative to its market cap has reached the highest level in over a year
The last time the OI/MC ratio increased while Bitcoin’s price decreased was in July 2021, which marked the bottom pic.twitter.com/Jgkr2L4m5A
— IntoTheBlock (@intotheblock) January 8, 2022
BTC is on track to record its third consecutive month in the red, with its price falling 10% in July. On January 7, the relative strength index (RSI) on Bitcoin’s daily chart fell below 30 for the first time since May 17, indicating that the largest cryptocurrency has been oversold. On January 8, a widely watched Bitcoin “fear and greed” index dropped to 10.
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