Cryptocurrency analytics firm Alphractal has issued a cautionary statement regarding the current state of the Bitcoin market.
The company noted a worrying trend in its 90- and 180-day Open Interest Delta, which measures the change in the total number of outstanding derivatives contracts.
According to Alphractal, these metrics show signs of weakness and suggest that institutional positions are being closed. Historically, such patterns have been seen before significant price declines in Bitcoin, according to the analyst.
Alphractal noted that during previous market cycles, a sharp rise in Open Interest Delta followed by a weakening often led to Bitcoin’s price falling by as much as 50% from its peak within weeks.
“It is critical to monitor this trend on a daily basis, as sustained declines in the delta could signal an impending market reset. Such a reset could lead to widespread liquidations in both long and short positions, increasing volatility in the cryptocurrency market,” the firm said.
According to the analyst firm, if the weakening trend continues, it could spell trouble for both institutional and individual investors. Rapid liquidations often trigger cascading effects in the market, creating opportunities for some and leading to significant losses for others.
*This is not investment advice.
