The crypto market decline continued into Wednesday as flagship cryptocurrency Bitcoin is ranging at $46,000 after abruptly falling by 15% from $51,000 on Tuesday. This price decline on the digital asset has instigated other trends similar to Tuesday’s where over $2.8 billion longs across crypto exchanges were liquidated. The open interest in futures markets has drastically plunged as traders mourn their losses.
Open interest is often a reliable indicator of the current market saturation. As market volatility continues to worsen, several traders have decided to close their positions in order not to incur more losses. The retracement was unexpected as traders anticipated a run to the top because for over three months spanning May to early August, Bitcoin and most altcoins traded at their lowest levels until things started to look up this month.
During the three-month lull, Bitcoin bottomed at $28,000 before moving to the upside of $52,000 as of Monday, making it a three-month high for the top crypto asset.
Few Open Interest Means Traders are Disillusioned and Closed Most Positions
When open interest is little, it translates to traders to fewer positions being opened in the market. The previous bullish trend was heralded by lots of long positions both in the options and futures market which means that traders had taken on more leverage than they should have.
This is why the losses recorded on Tuesday within an hour were massive. According to the data provided by ByBt, derivatives exchanges led in the number of liquidated long positions by 35%. Huobi exchange followed with 30%, and leading crypto exchange Binance trailed behind with 17%.
Notwithstanding, the decline created plenty of buying opportunities for traders as they bought their preferred crypto assets at discounts. Despite this, on-chain and technical indicators do not show any sign of an oversold market. Additionally, exchange inflow ratios remain bullish depicting that traders and investors are holding their crypto bags tightly.
El Salvador Buys the Dip Amid Market Retracement
‘Buy the dip’ chants have pervaded the crypto space including social platforms, however, Bitcoin is still trading at a discount having fallen by 9% from its Tuesday’s $51k high. Central American country, El Salvador joined in on the chants buying an additional 150 Bitcoin after an initial purchase of 400 Bitcoin. This brings its Bitcoin holdings to 550 Bitcoins valued at $25.4 million based on the current price of the asset.
The El Salvador Bitcoin adoption move generated much ruckus but proved inconsequential as the market faced the opposite direction. Its Bitcoin adoption law, passed on June 8th became effective on September 7. Bitcoin is now a legal tender for the country alongside the US dollar. President Nayib Bukele believes Bitcoin is the way out of El Salvador’s economic challenges including remittance.