The Bitcoin market has been surrounded by uncertainty in recent weeks following an unusually negative performance in October. While general market sentiment suggests the end of a bullish cycle may be near, the latest on-chain data indicates that the leading cryptocurrencies may simply be undergoing a reset. According to reports from blockchain companies, the recent downturn appears to be setting the stage for the coin’s next big move.
BTC is not in cycle exhaustion phase: XWIN
In its latest Quicktake post on the CryptoQuant platform, XWIN Research Japan revealed that Bitcoin’s current situation is in a rebuilding phase rather than the end of a cycle. DeFi companies believe that market fundamentals are being reset as excessive deleveraging has been removed in recent weeks.
Supporting the claim of deleveraging, XWIN Research highlighted that open interest in the Bitcoin futures market has decreased significantly since late October. This decrease in open interest indicates that short-term traders are exiting leveraged positions.
Blockchain companies noted that the peaks of past cycles often saw an increase in leveraged trading even at high price levels. However, this build-up of market position euphoria is not the case for Bitcoin at the moment, meaning we are likely not witnessing a cycle top.
Source: CryptoQuant
Additionally, XWIN Research Japan stated that Bitcoin price is currently lacking momentum and is not missing any structural support. The blockchain company pinpointed declining demand from US institutional investors as one of the factors for the lack of momentum, as noted by the negative Coinbase Premium Index.
As of this writing, Bitcoin’s value is around $101,930, with no significant movement in the past 24 hours. However, the flagship cryptocurrency has suffered an 8% price decline over the past seven days, and is in the red on a weekly basis.
Bitcoin market shows both strengths and weaknesses
Despite the weakening institutional demand for BTC, XWIN Research highlighted several positive signs that could contribute to the cryptocurrency’s eventual recovery. For example, the DeFi company revealed that Bitcoin foreign exchange reserves remain at multi-year lows, meaning supply remains limited.
Additionally, stablecoin liquidity is gradually returning to the market. This means purchasing power is also coming back, and investors may just be waiting for the right time. However, XWIN Research noted that despite the apparent market resilience, current sentiment suggests a range-bound move in the short term.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured images from iStock, charts from TradingView
