Over the past two weeks, the world’s leading cryptocurrency has struggled to definitively surpass the price of $116,000 and at the same time test the support of $106,000. As Bitcoin consolidates around $110,000, the latest on-chain analysis suggests an exciting outlook despite recent price struggles.
Why Bitcoin Price Could Soon See an Expansion
in a Quick post On the CryptoQuant platform, XWIN Research Japan, a cryptocurrency research institution, explores the possibility of a price reversal in the Bitcoin market, saying that the current consolidation could be representative of the asset creation momentum. The institution’s optimistic guess is based on readings obtained from three important on-chain metrics.
Firstly, XWIN Research Japan highlights that there has been a sharp drop in open interest on futures exchanges from its high set in September. For context, open interest is the total number of outstanding futures or options contracts that have not been settled or closed.
A sharp drop in open interest is usually indicative of events known as “deleverages,” where speculative positions are driven out of the market. Historically, a simultaneous drop in open interest along with the price of the cryptocurrency has often led to market resets, which typically precede sustainable price rallies as a result of rising spot demand.
Additionally, the education and research institution references the Spent Output Profit Ratio (SOPR) metric, which tracks whether investors are predominantly selling at a profit or loss. The SOPR has reportedly found stability around 1.0, meaning that most Bitcoin traders are trading around their cost base. By extension, this indicates that traders are not making significant profits or deep losses.
According to XWIN Research, this is a good sign pointing to the end of the previous capitulation phase and reflects the absorption of supply from short-term holders by demand from long-term holders.
As all of this plays out beneath the surface, XWIN Research also posits that liquidity could also be building up to the benefit of the flagship cryptocurrency. As reported by the institution, the total amount of the ERC-20 stablecoin in supply has reached an all-time high of approximately $158.8 billion. The crypto research institution speculates that if market sentiment improves, up to $158 billion in ERC-20 could be waiting on the sidelines to contribute to the upward pressure on Bitcoin price.
Bitcoin Price Overview
At the time of writing, Bitcoin is worth around $109,918, and data from CoinMarketCap reveals a slight growth of 0.22% over the past day.
Featured image from Pexels, chart from Tradingview
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