Bitcoin (BTC) long positions are coming under pressure as increased volatility points to an imminent range breakout. Analysts have observed that recent moves in the BTC price are heightening the risk of liquidation for leveraged traders, particularly as the market challenges new monthly lows.
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AAPLRising threats for Bitcoin long positions
Analysts have noted multiple threats to long positions as Bitcoin price action edges closer to the lowest levels seen in August. The combination of declining prices and market-wide shifts in derivative positioning has created an uncertain environment for bullish traders. Community analyst BorisD, writing on onchain analytics platform CryptoQuant, pointed out that leveraged long BTC positions are increasingly being liquidated as BTC/USD approaches month-to-date lows.
Recent data show a growing correlation between Bitcoin’s price and open interest (OI) on Binance. As both dropped on Thursday, the correlation reached 0.25. Open interest, which measures the total value of active derivative positions in the market, had been on a steady upward trajectory until recently, peaking at $8.15 billion on Wednesday.
“In the Bitcoin market, the Binance Open Interest (OI) Correlation and liquidation warning signals clearly reveal the process of leveraged positions being flushed out. Initially, as the price fell, the correlation shifted to the negative side, indicating that OI was rising despite declining prices,” BorisD stated.
“The simultaneous drop in both price and OI indicates that leveraged long positions are giving up, getting stopped out, or facing liquidation.”
The current market turmoil is evident in the 24-hour liquidation data, with CoinGlass reporting total cross-crypto liquidations hitting $236 million at the time of publication.
Mini dictionary: Open interest (OI) refers to the total number of outstanding derivative contracts, such as futures or options, that have not been settled. It is a metric widely used to gauge trading activity and market sentiment in derivatives markets.
| Metric | Recent Value | Earlier Value |
|---|---|---|
| Binance Open Interest | $8.15 billion | (peak) on Wednesday |
| 24h Crypto Liquidations | $236 million | (latest data) |
| Correlation (Price & OI) | 0.25 | (Thursday) |
Binance open interest and leveraged liquidations
The relationship between price and open interest is a crucial indicator of market sentiment. As the Bitcoin price began to fall, open interest at Binance initially continued to rise, suggesting that traders were increasing positions despite weakening spot prices. This divergence later gave way to a parallel decline in both price and OI, which analysts interpret as a sign of forced closing or liquidation of long positions.
The overlapping drop in both price and open interest has led to speculation that the market is undergoing a “cleanout” of excessive leverage and risk-taking. The swift shift in correlation values highlights this transitional phase, with leveraged traders appearing to exit en masse amid price volatility.
CryptoQuant CEO weighs in: “No bull market yet”
CryptoQuant is a leading onchain analytics company that provides data-driven insights for investors and traders in the digital assets space. Its CEO, Ki Young Ju, shared his perspective on the current market conditions via social media. He wrote that a new Bitcoin bull market is yet to materialize, referencing several onchain indicators that remain in what he termed “bear” territory.
The stars haven’t aligned for a Bitcoin bull run just yet, as multiple onchain indicators continue to suggest persistent bearish sentiment.
Multiple composite onchain metrics, including those highlighted by onchain analytics provider Glassnode, reflect a market still in a period of extended capitulation. Glassnode’s indicators are currently registering their longest bearish phase since late 2022.
This ongoing bearish sentiment is reflected across a spectrum of technical measures, suggesting macro market recovery has yet to take hold for Bitcoin.
