Bitcoin has $20K but analysts believe that BTC open interest allows for more deleveraging

The price of Bitcoin ( Bitcoin) continues to fall below $20,000, and analysts have begun to predict a deeper downturn in the near term. Independent market analyst Philip Swift tweeted earlier in the week that the Crypto Fear & Greed Index had fallen back to “Extreme Fear”, reflecting softer sentiment among investors.

The Aug 29th, analytics firm Delphi Digital announced that Bitcoin open interests had reached a new record and stated:

After the August 26th market collapse, the Futures Open Interest Ratio for Bitcoin reached its highest ever level at over 3%.

Delphi Digital says that higher values indicate that open interest is high relative to the market. This means that there is a greater risk of market squeezes and liquidation cascades.

Bitcoin open interest. Source: Delphi Digital

It is not clear what could trigger such an event, but any continuation in the current downtrend of stocks, which saw the Dow and S&P 500 close the fourth day at a loss, could continue weighing on Bitcoin’s price. CNBC data shows that the Dow closed August with a loss of 4.1%, while the S&P 500 (and Nasdaq) closed the month with losses of 4.2% and 4.6% respectively.

Loretta Mester, President of the Cleveland Federal Reserve, also stated she expected the benchmark interest rate rise to above 4%. She suggested that it was unlikely that any reductions will occur throughout 2023. This is well over the Fed’s target of 2.25% to 2.5%.

Given the performance of crypto markets since July 26, 2022 when the Fed began raising rates, and the strong correlation between BTC and equities, it is not surprising that Bitcoin prices will continue to fall over the next few months.

Similar: A potential double-bottom in Bitcoin prices could spur a rally to $30K, despite extreme fear

However, traders seem to be bullish about the Merge. After last week’s selloff, Ether ( Ethereum) as well as ETH staking tokens have performed relatively well. Ether traded slightly below $1600 after dropping to $1.422 on Aug. 28. The largest ETH staking platform Lido (LDO) is up 12% and 32% respectively from last week’s plunge to $1.55.

These views and opinions are the author’s and do not necessarily reflect those of You should do your research before making any investment or trading decision.

Opinion writer on 7trade7