Bitcoin Futures Open Interest Drops by 300k BTC, but is it a Bad Sign?

By Tsunami 03/17/23 11:05 AM

Glassnode, a popular blockchain data analysis firm, recently revealed that the Futures Open Interest (OI) for Bitcoin has decreased by over 300,000 BTC since it peaked in October 2022. The OI represents the total amount of funds allocated in open futures contracts, which peaked with roughly 667,000 BTC allocated in open interest contracts.

However, the decrease in OI is not necessarily a negative indicator for Bitcoin. In fact, Bitcoin has seen a significant price jump from $19,000 to $26,000 while the leverage has been unwound. This is seen as a healthy sign for the cryptocurrency.

Over the past two weeks, there has been roughly a 15% decrease in OI, bringing it back to similar levels seen in early 2022. For this trend to continue, OI must continue to decline while spot Bitcoin accumulates.

According to CryptoQuant, Bitcoin is approaching key realized price levels for the long-term holder cohort. By using Realized Price UTXO Age Bands, investors can understand the cost-basis of the long-term holder cohort by holding period. These are likely to be major support and resistance levels.

Currently, the 6-month to 12-month UTXO Band and the 2-year to 3-year UTXO Band are crossing at 28.3k. The BTC market price is 25.9k, which is close to these bands. The Realized Cap for the same period is 6-month to 12-month: 13.2%, 2-year to 3-year: 17.9%, accounting for 31.1% (one-third) of the total.

Therefore, 28.3k is expected to be an important section for on-chain analysis. In the case of breaking through the cost-basis of 28.3k, strong resistance may appear due to the psychology of wanting to recoup the lost money.

Overall, the decrease in OI is not necessarily a bad sign for Bitcoin, as long as the price continues to rise while the leverage is unwound. Investors will be closely monitoring the key realized price levels and the impact of breaking through them.

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