Major Cryptocurrencies Experience Sharp Decline in Open Interest Amid Market Volatility
Summary:
In the last month, the open interest (OI) of major cryptocurrencies like XRP, Solana, and Dogecoin have fallen by 51%, signaling decreasing market interest. The dip in Dogecoin's OI was the most drastic among the top nine cryptocurrencies, slipping 64% since April 1. Surges in market instability, uncertainties following the Bitcoin halving event, and shifts of capital from altcoins towards Bitcoin have collectively contributed to this decline.
Over the past month, substantial reductions of 51% have been noted in the open interest (OI) for prominent cryptocurrencies like XRP, Solana, and Dogecoin. This downfall, as discussed by crypto trader TheCryptoMann on April 30, signifies a diminishing interest among the market participants, observable through the decreasing OI. Generally understood as an indicator of the total unsettled or outstanding cryptocurrency future contracts across various exchanges, OI forms an important parameter in conveying market trends and predicting future price changes.
Among the top nine cryptocurrencies by market cap, Dogecoin has suffered the steepest reduction in OI, down 64% to $668.2 million since the beginning of April, based on CoinGlass data. Meanwhile, Solana's OI currently sits at $1.51 billion, a drop of 47% since April 1. XRP's OI has also seen a significant downfall of 44%, now valued at $497.67 million, over the same period.
Shaky market conditions often culminate into declining OI, since market unpredictability leads traders to exhibit hesitation in making a move on either side of the market. Crypto trader TheoTrader pointed out in an April 26 post that the current OI closely matches the levels observed during the November 2022 shutdown of the now obsolete crypto exchange FTX.
The financial repercussions following the April 20 Bitcoin halving, marked by a drop in Bitcoin miner's earnings to a new annual low, is another leading contributor to the prevailing market uncertainty. There is an atmosphere of anticipation regarding a likely market correction, but its severity remains uncertain, discouraging traders from striking new positions.
Bitcoin and Ether, the current leading cryptocurrencies in terms of market cap, have also endured declining OI consistent with the broader market downturn. Bitcoin's OI has shrunk by 21% to $25.58 billion, with its price dropping 14.87% to $60,149 at the time of reporting, according to CoinMarketCap. Similarly, Ether’s OI has decreased by 22% to $10.02 billion, with a price drop of 16.67%, currently hovering just above the critical support level of $3,005.
In the last 30 days, we’ve witnessed a shift of capital from altcoins towards Bitcoin, resulting in Bitcoin's increased market dominance by 2.13% to a total of 54.77%, as per TradingView data.
The story contained does not offer financial advice or investment recommendations. All investments come with risks, so readers should undertake their own due diligence.
Published At
5/1/2024 9:23:00 AM
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