According to this metric, bitcoin may be close to reaching the bottom of the ongoing correction.
In a recent tweet, cryptocurrency-focused analytics firm IntoTheBlock noted that a potential Bitcoin short squeeze could be in the works.
Its analysis is based on the ratio of bitcoin’s open interest relative to the flagship cryptocurrency’s market cap, which recently reached a one-year peak of around 2.25%.
According to data provided by Coinglass, bitcoin futures open interest, which represents all outstanding contracts held by traders, recently hit a new all-time high of $16.68 billion, with crypto giant Binance accounting for 28.86 percent of the amount. % Is part of. FTX and CME Group come in second and third (17.65% and 14.06%) respectively.
IntoTheBlock recalls that the OI/MC ratio also increased against the backdrop of the decline in the bitcoin price in July 2021, the month in which bitcoin fell to $29,400 before resuming its uptrend.
Hence, the analytics firm expects a similar scenario to emerge this time as well.
Possible short squeeze ahead
the ratio of #bitcoinOpen interest relative to its market cap has hit a year-high
The last time the OI/MC ratio increased while the price of bitcoin decreased was in July 2021, down pic.twitter.com/Jgkr2L4m5A
— IntoTheBlock (@intotheblock) 8 January 2022
Bitcoin is now on track to record a third consecutive month in the red, with its price falling 10% in July. It is currently changing hands on the major exchanges at $41,502.
extreme fear and oversold conditions
On January 7, the Relative Strength Index (RSI) on Bitcoin’s daily chart fell below 30 for the first time since May 17, indicating that the largest cryptocurrency is oversold.
On January 8, a widely tracked bitcoin “fear and greed” index 10. spilled over,
The bulls may not have come out of the forest yet. As reported by U.Today, Galaxy Digital CEO Mike Novogratz recently predicted that the biggest cryptocurrency could trade below $38,000, which is the lower boundary of a key support area.