According to the latest news, Bitcoin futures volume and open interest are dropping steadily. Data Indicates that since the September peak, Bitcoin’s future volume has eased by 60% from more than $25 billion to approximately $10 billion.
Remarkably, traders await continued consolidation below the $11,000 resistance in the near term, which could extend the trend of declining volume in futures.
According to the cryptocurrency trader, Edward Morra, liquidity explains Bitcoin would likely witness more sideways trading.
While the decline in trading activity could seem like a negative metric, it could also symbolize that a bull cycle is beginning.
The Bitcoin futures market represents most of the overleveraged trades in the Bitcoin market, and famous platforms such are Binance, BitMEX, and ByBit allow leverage of up to 125x.
Remarkably, traders are vulnerable to liquidation while they are highly leveraged. For example, if a 10x long contract placed at $10,000 is liquidated at $9,000, it pushes the customer to market-sell the position.
As many traders are in exact positions, this raises sell pressure and can catalyze a significant sell-off in Bitcoin value.
Bitcoin could be in danger
Bitcoin will be in danger if the futures market open interest and volume spike. Besides, it can raise the probability of cascading liquidations. For example, we all remember Black Thursday when more than $1 billion worth of futures contracts were liquidated as BTC value decreased under $3,600.
We can call the drop in futures volume a potentially bullish event. A small price movement could turn into a significant price swing if mass liquidations are triggered at a specific price level.
As such, the futures market’s declining volume and open interest could set the stage for a stable and extended rebound to take form.
There are often multiple spikes in open interest throughout bull markets, but the market remains indifferent for a prolonged period.