š Sharp drop in open interest following a short-term decline in Bitcoin prices:
* Binance's Bitcoin open interest (OI) witnessed a notable drop from $14 billion to under $13.5 billion, coinciding with BTC's price decline from above $118,000 to below $115,000.
*Moreover, the chart shows a -4% OI decline within a single day, a move typically associated with liquidation events.
*In such cases, traders using leverage face forced closure of positions due to margin calls.
* These automatic sell-offs pressure the market further and contribute to the sharp dip in open interest.
* One likely cause is traders closing their leveraged long positions to avoid further losses as prices fell, exacerbating the sell-off due to panic (fear-driven liquidation).
š» Binance Net Taker Volume Deepens Negative Territory
The Net Taker Volume on Binance revisited negative levels near -$160 million, reinforcing the narrative of escalating bearish sentiment.
This metric suggests an increase in aggressive selling, probably fueled by retail traders offloading positions or placing short orders in anticipation of further drops.
* Crucially, this net selling aligned with the drop in open interest, suggesting that many derivative traders are closing late long positions out of panic.
* The combination of falling prices, shrinking OI, and bearish volume paints a picture of a market momentarily dominated by fear and uncertainty.
š Possibility of Short-Term Price Recovery Amid Derivatives Shakeout
Combining current market conditions, the sharp drop in open interest alongside a surge in retail-driven sell volume or the early stages of new short position openings may paradoxically set the stage for a near-term price rebound.
With selling pressure potentially exhausted and short exposure rising, the market could enter a rebalancing phase, opening a window for price stabilization or a short squeeze-driven bounce.
Written by Amr Taha
