Bitcoin price stagnant for yet another week despite record inflation — here’s why
Bitcoin has failed to repeatedly breach its all-important $49K resistance as US inflation numbers scale up to a four-decade high.
- A study has revealed that Bitcoin’s open interest (OI) ratio has dipped by a whopping 50% since the December 4 crash.
- The total market cap of the digital asset sector has continued to hover around the $2.38 trillion mark over the past week.
- Bitcoin’s fortnightly losses currently stand at 14.3%.
Bitcoin (BTC) continues to confound investors across the globe. The world’s largest cryptocurrency by total market capitalization continues to showcase increasing monetary stagnation, especially after many analysts had projected it to scale past the $100K mark by the end of 2021. At press time, BTC is trading at $47,197.
Since the market crash witnessed earlier this month, Bitcoin has struggled to sustain its price support of $47,500, causing over $831 million in leveraged BTC long futures contracts to be wiped out from the market. This extreme volatility, in large part, seems to have been spurred by news of a new coronavirus variant Omicron, as well as US inflation numbers recently scaling up to a 40-year high.
The overall bearish mood has been compounded by news of leading Chinese real-estate developer Evergrande defaulting on its US dollar debt, estimated to be worth $300 billion.
Despite BTC’s price correcting by nearly 24% over the past month, something that may have scared potential newcomers from making their way into the market, HODLers and whales have added to their existing positions as usual. Fintech firm MicroStrategy revealed on December 9 that it had added 1,434 Bitcoin to its coffers, taking the firm’s total digital asset holdings to 122,478 BTC.
Massive upside in store for BTC?
As per historical data available online, every time the price of Bitcoin has dipped steeply, the asset has witnessed a significant decrease in its OI across various derivative exchanges. A recent study from Delphi Digital suggests that following the recent market downturn, a 50% decrease in OI has been recorded.
And, while these numbers may look quite discouraging, deleveraging events such as these indicate a good long-term upside for BTC. In fact, analysts for Delphi believe the ongoing sell-off could finally be tapering off and that the cryptocurrency will start on a path of upward ascent once again over the next few months.
Range-bound trading may be witnessed for some more time
Ben Lilly, co-founder of Jarvis Labs, believes the flagship cryptocurrency will most likely continue to trade in its current price range, at least for the next 2–3 weeks. He noted that this will be the case primarily due to December 31 marking “the largest open interest in terms of open contracts.”
Lilly also believes that whenever the market witnesses a major pullback such as the one observed recently, it usually takes some time for the ecosystem to make a full recovery. It will be interesting to see how the market continues to behave as we prepare to close out yet another calendar year.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.