Over the past two weeks, the world’s leading cryptocurrency has struggled to decisively break through the $116,000 price mark while testing the $106,000 support. As Bitcoin stabilizes around $110,000, the latest on-chain analysis suggests an exciting outlook despite recent price struggles.
Why Bitcoin Price Could Expand Soon
Cryptocurrency research institute XWIN Research Japan explored the possibility of a price reversal in the Bitcoin market in a QuickTake post on the CryptoQuant platform, saying the current consolidation could represent momentum in wealth creation. The agency’s optimistic estimates rely on measurements from three key on-chain metrics.
First, XWIN Research Japan highlights a sharp decline in open interest across futures exchanges since the peak established in September. For context, open interest is the total number of outstanding futures or options contracts that have not been settled or closed.
A sudden drop in open interest usually indicates an event called a “leverage wipeout,” where speculative positions are forced out of the market. Historically, market resets have often occurred due to a decline in open interest coinciding with the price of a cryptocurrency, and are usually preceded by a sustained price increase due to increased spot demand.
Additionally, this educational and research institute refers to the Expenditure Return Ratio (SOPR) indicator, which tracks whether investors are primarily making a profit or loss. Reportedly, SOPR has been found to be stable around 1.0, meaning that the majority of Bitcoin traders are trading on a cost basis. In turn, this indicates that the trader is neither making big profits nor incurring large losses.
According to XWIN Research, this is a good sign indicating the end of the previous capitulation phase and reflects the supply of short-term holders being absorbed by the demand of long-term holders.
With all this going on behind the scenes, XWIN Research speculates that liquidity may also be accumulating for the benefit of the flagship cryptocurrency. According to the agency’s report, the total supply of stablecoins ERC-20 has reached an all-time high of approximately $158.8 billion. The cryptocurrency research institute estimates that $158 billion worth of ERC-20 could be waiting in the wings to contribute to upward pressure on Bitcoin prices if market sentiment improves.
Bitcoin price overview
At the time of this writing, Bitcoin is worth around $109,918, showing a modest growth of 0.22% over the past day, according to CoinMarketCap data.
Featured images from Pexels, charts from Tradingview
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