Analysts say Bitcoins will “facilitate” clearing of open interest

Bitcoin’s decline to $ 42,000 has wiped out its open interest and liquidated a large number of leveraged traders, but analysts say resetting open interest is often a great buying opportunity.

Market analysis

The weekend is just around the corner and fear remains the prevailing short-term sentiment in the crypto market. Bitcoin (BTC) price fell to $ 47,250 this morning and investors bit their nails after US consumer price index (CPI) data showed inflation hit a four-year high of 6.8%.

Data from Cointelegraph Marketplaces Professional and TradingView show that the bulls’ midday push to reclaim the $ 50,000 support level has been manually defeated and sellers have brought the price back below $ 48,000, which could force another daily high for the premium cryptocurrency.

With the prospect of a major rally towards the end of the year, traders have turned their attention to managing risk and identifying the best levels to buy. This is what analysts say about the prospects for Bitcoin in 2022.

Deleting open settings “makes things easier”

As seen in previous instances where the price of BTC has fallen rapidly, the Open Interest (OI) for BTC on the derivatives exchanges has decreased significantly, as highlighted in a recent report by Delphi Digital. The report notes a 50% decrease in open positions following this recent market downturn as over-indebted long positions were eliminated.

While the experience can be awkward for overexposed traders, analysts say eradicating such events is beneficial in the long run and will often “give up” room for further growth as the previous exuberance and excesses are replaced with a more measured trading environment.

Delphi Electronic said the sharp drop in open interest last month could also suggest that Delphi Digital says there may be a near-term low for BTC in the pipeline and the possibility that the current sell-off may be exhausted.

Delphi Electronic said:

“The 30-day decline in% open interest for BTC has reached a level that previously signaled that a bottom was forming (or not too far away).”

Range-bound trading for BTC until 2022

According to Ben Lilly, co-founder of Jarvis Labs, Bitcoin price is likely to “stay in this trading range for at least the end of the month,” largely because December 31st represents “the greatest open interest” under open contract terms. ”

Lilly highlighted previous large price declines that resulted in high liquidation volumes and explained that it often takes a while for the market to build momentum after those declines.

Lilly said

“Fortunately, this is a great setup for anyone looking to accumulate weekly or at the bottom of the current trading range.”

Related: Trader calls Bitcoin price crash of 2017, raises fears of “double top”

Should traders be looking for a continuation of an uptrend?

The Twitter analyst and pseudonym “Rekt Capital”, the sent The following chart of BTC price trades between two major exponential moving averages.

Right Money said

“Overall, BTC is currently consolidating within the two major EMAs. Just like May 2021. And just like May … Sustained price stability and a consolidation between these two EMAs should lead to a continuation of a new macroeconomic uptrend. ”

The total capitalization of the crypto market is currently $ 2.238 trillion and the dominance of bitcoin is 40.7%.