bitcoin could see a drop of at least 20% in the near future, if we go by the historical pattern of this indicator.
Aggregate open interest of assets except bitcoin is forming a bearish pattern
in a new mail On X, CryptoQuant Netherlands community manager Maartunn has talked about the formation of a bearish pattern in the aggregate open interest of all cryptocurrencies except bitcoin.
“Open interest” here refers to an indicator that measures the total number of derivatives positions (in USD) that are open on all exchanges in the world at the moment.
When the value of this metric is high for any cryptocurrency, it means that the asset has a large number of positions in the derivatives market currently. Generally, this type of trend makes the price more likely to show volatile movements.
On the other hand, low values imply that the derived side of the currency in question is cold at the moment, which may suggest a relative period of calm for the price.
In the context of the current discussion, the aggregate open interest of all cryptocurrencies except bitcoin is of interest. The following graph shows the trend of this indicator in recent years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/Bitcoin-may-be-headed-for-a-drop-of-more-than.jpeg" alt="bitcoin Open Interest” width=”1404″ height=”668″ loading=”lazy”/>
Looks like the value of the metric has been rising in recent days | Source: @JA_Maartun on X
On the chart, Maartunn has highlighted an interesting pattern that has followed the aggregate open interest of altcoins and the price of bitcoin over the past two years.
It would seem that every time the indicator value crossed the $12.2 billion mark, btc price observed a higher formation and subsequently recorded a decline. According to the analyst, this drop that has always followed the pattern has always been at least 20%.
This year alone, the cryptocurrency’s price highs seen in February, April, and July occurred during periods when the metric was above the $12.2 billion level.
From the chart, it is visible that the aggregate sector open interest excluding btc once again crossed above this historically significant line when the asset’s rally towards current levels first occurred.
Since then, the metric has only continued to rise and has now reached the $13.8 billion mark, meaning that the derivatives market has become quite overheated.
If the pattern that bitcoin has shown in the past is anything to go by, then the asset may be rapidly approaching the top right now, given the overheated open interest of altcoins.
as another analyst As noted on X, the dominance of futures open interest offset by assets other than bitcoin and ethereum has also reached 2023 highs.
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/1699373472_778_Bitcoin-may-be-headed-for-a-drop-of-more-than.jpeg" alt="Altcoin Open Interest Dominance vs. bitcoin” width=”1200″ height=”800″ loading=”lazy”/>
The metric's value appears to have gone up in the last few days | Source: @WClementelll
This puts the overheated state of the market back into perspective, which could end dangerously for bitcoin as well as the rest of the cryptocurrency sector.
btc Price
bitcoin had made another attempt to reach $35,000 in the past two days, but the asset has fallen below the level again and is now trading around $34,700.
<img decoding="async" loading="lazy" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/czcLN8IP/" alt="bitcoin price chart” width=”1534″ height=”869″/>
btc has plunged during the past day | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Charts from TradingView.com, Coinalyze.net
