[Analysis] Bitcoin open interest plunges by 1.3 million BTC in a month…"Could signal a bottom"

Bitcoin (BTC) open interest has reportedly declined by about 1.3 million BTC over the past month. This is the largest drop within a cycle, and analysts suggest that short-term leverage liquidations are entering their final stage, potentially laying the groundwork for a rebound.

On the 29th (local time), the crypto asset (cryptocurrency) specialist media Cointelegraph reported that, according to a contribution by CryptoQuant, analyst Darkfost said, "Bitcoin open interest has entered the steepest decline within a cycle over a 30-day period," adding, "the total decline amounts to roughly 1.3 million BTC." At the current Bitcoin price (about $87,500), that equates to approximately $114 billion in positions disappearing from the market.

He diagnosed that "weeks of recent price adjustments triggered cascading liquidations, and investors have been reducing leverage exposure and cutting back on futures trading."

The market noted that sharp drops in open interest typically appear during bottoming periods, and therefore this deleveraging could also be a precursor to a mid-term rebound.

The analyst explained, "It's a phase where excessive positions are being liquidated and speculative bets are reduced, restoring market balance," adding, "such a 'purging process' has historically repeated just before bullish turnarounds." He emphasized the significance of the current drop, saying, "The last similar 30-day plunge was during the 2022 bear market."

Meanwhile, Bitcoin has fallen about 20% over the past month, and the drop from the $126,000 high recorded last October exceeds 30%.