Bitcoin Futures Open Interest Declines by $7 Billion – What is Behind this Retracement?

Coinglass Data reveals a 14% decline in Bitcoin BTC's spot market price. Amid this decline, the notional open interest (OI) in Bitcoin futures dropped by 18% from $37 billion to $30 billion within one month.

However, while Bitcoin futures OI decline, open interest in BTC-related terms has remained unchanged, with positive funding rates. This observation signals renewed demand for long positions despite recent price dips.

Coinglass Reveals Key Bitcoin Metrics

Coinglass data confirms that BTC's open interest remained above the 500,000 BTC milestone over four weeks.

In this context, open interest is the number of active or open contracts for an asset at a given time. Notably, the notional open interest is derived by multiplying the number of units in a contract by the current spot market price.

This means changes in an asset's price influence the notional open interest. So, the current decline in notional OI stems from the ongoing downtrend.

According to Coinglass data, the perpetual funding rates collected by exchanges every eight hours remained positive, favoring bullish traders. BTC's steady open interest and positive funding rates suggest that some traders have entered new long trades.

These new long positions are gradually replacing the bullish trades that were liquidated, which is a sign of optimism.

Market Analysts Highlight Factors Causing Bitcoin's Retracement

Meanwhile, financial service provider QCP Capital analyzed Bitcoin's performance and several causal factors for the ongoing downturn.

QCP Asia Colour - 4 July 24

1/ Yet another day of heavy selling pressure, causing BTC to fall below the 60k support level and reaching lows of 57,875.

- QCP Capital (@qcpcapital) July 4, 2024

QCP Capital noted that Bitcoin faced heavy selling pressure due to Mt. Gox repayments, miners' BTC coin sales, government sales, and other economic data. According to the platform, miners' capitulation historically signals Bitcoin's cycle bottom.

2/#BTC miners are showing signs of capitulation. Historically this has been associated with a bottom in prices with the last comparable hash rate drawdown occurring in 2022 when BTC traded to 17,000.

- QCP Capital (@qcpcapital) July 4, 2024

These factors contributed to pushing Bitcoin below the $60,000 threshold.

However, the options market remains positive despite the selling pressure as interest shifts to Ethereum call options. So, based on the recent selling pressure on Bitcoin, QCP Capital believes Ethereum appears poised for a more robust rebound.

3/ Despite the sell-off in crypto, the options market is still optimistic as we continue to see interest heavily skewed towards ETH Calls for Sep and Dec expiries.

- QCP Capital (@qcpcapital) July 4, 2024

Additionally, the analytical platform WhaleWire shares a sentiment similar to that of QCP Capital. The analysts believe the Mt. Gox repayments are the second-largest liquidation event in BTC history. These Mt. Gox repayments also coincide with Germany's sale of $3.5 billion worth of seized Bitcoin.

According to Santiment data, the markets continue to bleed, and social media displays historic levels of FUD. Crypto forums have more mentions of sell' than buy' in the last 24 hours.

Markets have continued to bleed, and social media is now showing historic levels of FUD. It is rare for an hour to go by where there are more mentions of sell" than there are buy" across crypto forums. But we've seen a few of these instances in just the past 24 hours,... pic.twitter.com/DdXAYP6n81

- Santiment (@santimentfeed) July 5, 2024

However, Santiment notes that some traders can capitalize on investors' anger and frustration to buy more BTC.

Santiment also analyzed the top seven Bitcoin ETFs: GBTC, IBIT, FBTC, ARKB, BTCO, BITB, and HODL. The data reveals that the BTC Spot ETF trading volume declined early in July due to traders' indecision.

Based on bullish sentiments, Santiment predicts that Spot ETF trading volume will increase after July 4.

How is BTC Faring Today?

BTC is trading around the $55,705 price range with a 3.0% decline as of 10:49 a.m. EST. In the past 30 days, the asset has lost 21.2% of its price gains.

BTC's decline to a low of $53,600 today represents its lowest price point since February. The flagship cryptocurrency is 24.8% below its March 14 all-time high value of $73,737.

Given the prevailing market condition, BTC could remain in the $50,000-$55,000 price range.

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