The Bitcoin market has been in a state of uncertainty in recent weeks, following its uncharacteristically negative performance in October. While general market sentiment suggests that the end of the bull cycle may be near, the latest on-chain data indicates that the premier cryptocurrency may just be undergoing a reset. According to a blockchain company’s report, recent sluggishness appears to be laying the groundwork for the coin’s next big move.
BTC not in a cycle exhaustion phase: XWIN
In the latest Quicktake post on the CryptoQuant platform, XWIN Research Japan revealed that the current situation for Bitcoin looks less like the end of a cycle and more like a restructuring phase. The DeFi firm believes market fundamentals are recovering after the purge of excess leverage in recent weeks.
Supporting the claim of reduced leverage, XWIN Research highlighted that open interest in the Bitcoin futures market has decreased significantly since late October. This decline in open interest signals that short-term traders are exiting their leveraged positions.
The blockchain company noted that during previous cycle peaks, leveraged trades often increased even at high price levels. However, this euphoric build-up of market positions is not currently the case for Bitcoin, meaning a cycle top is unlikely to be what is being witnessed.
Source: CryptoQuant
Additionally, XWIN Research Japan said that the Bitcoin price currently lacks momentum and does not lack structural support. The blockchain company pointed to declining demand from US institutional investors – noted by negative Coinbase Premium Index—as one of the factors behind the lack of speed.
At the time of writing, Bitcoin is valued at around $101,930, reflecting no significant movement in the past 24 hours. However, the flagship cryptocurrency is deep in the red on the weekly time frame, having suffered an 8% price decline over the past seven days.
The Bitcoin market shows both strengths and weaknesses
Despite the weakened institutional demand for BTC, XWIN Research highlighted some positive signs that could contribute to the cryptocurrency’s eventual recovery. For example, the DeFi company revealed that Bitcoin exchange reserves remain at multi-year lows, meaning a limited supply is still available.
Additionally, stablecoin liquidity is gradually flowing back into the market; that means purchasing power is also coming back, and investors may just be waiting for the right time. However, XWIN Research noted that, despite the market’s apparent resilience, current sentiment suggests a range-bound movement in the near term.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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