In recent analysis of Bitcoin (BTC) futures, it has been revealed that traders who opened new short positions over the weekend, particularly above the $70,000 mark, may soon face liquidation risks. This follows a significant wave of leveraged position closures on Monday, resulting in a decrease in open interest within the Bitcoin futures market.
Data indicates a notable decline, with the weekly change in Bitcoin futures open interest dropping to -2.46% as of Monday. This marks a stark contrast to an increase of 8.9% on March 31, highlighting a broader deleveraging trend. As of the latest observations, total open interest stands at approximately 318,000 BTC. The shift into negative territory occurred on April 3, suggesting the early stages of a deleveraging phase where a substantial quantity of long-side leverage has been eliminated without triggering significant liquidations that would drastically impact Bitcoin’s price.
Market insights from Bitcoin researcher Axel Adler Jr. indicate that the funding rate metrics further illustrate a shift in market sentiment. The seven-day average funding rate—which is a fee paid between traders for holding long and short positions—has notably decreased. On March 31, the funding rate was at 0.33%, but by April 13, it plunged to -0.1738%, with exchanges like Bybit and OKX reflecting even lower values. This negative funding rate indicates that sellers are compensating buyers, adding further pressure to short positions as the current price trends remain upward.
Despite the apparent shift, Bitcoin’s price has managed to remain stable above $70,000, creating a situation where late short positions could be squeezed if demand for Bitcoin rebounds. The current market setup suggests that long positions were exited first, followed by an influx of short positions. This accumulation of short positions against an upward price trend raises the potential for volatility as traders adapt to the current environment.
Amidst these developments, long-term valuation metrics for Bitcoin show that the cryptocurrency is nearing historically low levels. Michaël van de Poppe, founder of MN Capital, highlighted three crucial indicators illustrating this trend. The Puell Multiple Z-Score, which compares Bitcoin miner revenue to historical averages, is at its lowest in a decade, echoing levels seen during previous price bottoms in 2018, 2020, and 2022. Additionally, the Spent Output Profit Ratio (SOPR) Z-Score—a measure of profits versus losses upon sale—has reached an unprecedented low, indicating widespread loss realization among investors. The market-value-to-realized-value (MVRV) Z-Score also reflects a similar trend, situating Bitcoin prices close to aggregate cost basis levels.
These indicators suggest that most investors have moved away from significant profits, thus cooling previous buying enthusiasm. The current reset often follows a phase of heavy selling, where short-term traders exit positions in favor of long-term holders. Notably, liquidity levels between $64,000 and $66,000 are visible, while the $74,000 mark remains a tested resistance level.
Looking ahead, Van de Poppe remained cautiously optimistic, asserting, “For sure, markets can tumble and sweep the lows for liquidity, but I don’t think we’ll see much more downside in the markets, or at least 90% of the downside is already captured.” This sentiment underlines a belief that substantial selling pressure may have already been absorbed by the market, paving the way for potential stabilization in Bitcoin’s price movement.
