The Bitcoin market has been in a state of uncertainty over the past few weeks, following its unusually negative performance in October. While general market sentiment suggests that the end of the bull cycle may be near, the latest on-chain data indicates that the leading cryptocurrency may simply be undergoing a reset. According to a report from a blockchain company, the recent slowness appears to be setting the stage for the coin’s next major move.
BTC is not in a phase of cycle exhaustion: XWIN
In the latest Quicktake article on the CryptoQuant platform, XWIN Research Japan revealed that the current Bitcoin situation looks less like the end of a cycle and more like a restructuring phase. The DeFi company believes that the foundations of the market are being reset after excessive debt was removed in recent weeks.
Supporting the claim of reduced leverage, XWIN Research highlighted that open interest in the Bitcoin futures market has declined significantly since late October. This drop in open interest signals the exit of short-term traders from their leveraged positions.
The blockchain company noted that during peaks in past cycles, leveraged trades often increased, even at high price levels. However, this euphoric accumulation of market positions is not currently the case for Bitcoin, meaning a cycle top is likely not what we are seeing.
Source: CryptoQuant
Furthermore, XWIN Research Japan stated that the Bitcoin price currently lacks momentum and does not lack structural support. The blockchain company identified declining demand from US institutional investors – as highlighted by the negative Coinbase Premium Index – as one of the factors behind the lack of momentum.
At the time of writing, Bitcoin is valued at around $101,930, reflecting no significant movement over the past 24 hours. The flagship cryptocurrency is, however, deep in the red on the weekly timeframe, having suffered an 8% price drop over the past seven days.
The Bitcoin Market Shows Both Its Strengths and Weaknesses
Despite weakening institutional demand for BTC, XWIN Research has highlighted some positive signs that could contribute to the cryptocurrency’s eventual recovery. For example, the DeFi company revealed that Bitcoin exchange reserves remain at multi-year lows, meaning limited supply is still available.
Additionally, stable coin liquidity is gradually returning to the market; this means that purchasing power is also returning and investors may simply be waiting for the right moment. However, XWIN Research noted that despite the market’s obvious resilience, current sentiment suggests limited movement in the near term.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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