Over the past two weeks, the world’s leading cryptocurrency has struggled to break definitively above the $116,000 price while testing the $106,000 support. As Bitcoin consolidates around $110,000, the latest analysis on the chain suggests an exciting outlook despite the recent price struggle.
Why Bitcoin Price May See Expansion Soon
In one QuickTake posts on the CryptoQuant platform, XWIN Research Japan, a crypto research institution, examines the possibility of a price reversal in the Bitcoin market, saying that the current consolidation may be representative of asset-building momentum. The department’s optimistic guess relies on readings obtained from three key gauges in the chain.
First, XWIN Research Japan highlights that there has been a sharp decline in Open Interest across futures exchanges since its peak was established in September. For context, open interest is the total number of outstanding futures or options contracts that have not been settled or closed.
A sharp decline in open interest is usually indicative of events known as leverage wipeouts, where speculative positions are forced out of the market. Historically, a simultaneous decline in open interest alongside the cryptocurrency’s price has often led to market resets, usually preceding sustained price rallies as a result of growing spot demand.
In addition, the educational and research institution refers to the Spent Output Profit Ratio (SOPR) metric, which tracks whether investors are mainly selling at a profit or a loss. SOPR has reportedly found stability around 1.0, meaning the majority of Bitcoin traders are trading around their cost base. By extension, this points out that traders have neither significant profits nor deep losses.
According to XWIN Research, this is a good sign that points to the end of the previous capitulation phase and reflects the absorption of short-term holder supply by long-term holder demand.
As all these play out below the surface, XWIN Research also postulates that liquidity may also accumulate in favor of the flagship cryptocurrency. As reported by the institution, the total amount of stablecoin ERC-20 in supply has reached a record level of about $158.8 billion. The crypto research institution speculates that if market sentiment sees an improvement, as much as $158 billion in ERC-20 could be waiting on the sidelines to contribute to upward pressure on Bitcoin’s price.
Bitcoin price overview
At the time of writing, Bitcoin is worth around $109,918, with data from CoinMarketCap revealing a small growth of 0.22% in the past 24 hours.
Featured image from Pexels, chart from Tradingview
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