Traders utilizing options and futures in the cryptocurrency market have suffered significant losses amounting to $1 billion after Bitcoin experienced a sharp decline of over 14% from its recent all-time high of $69,200 on March 5.
On March 6, Santiment, an on-chain analytics provider, highlighted in a post on X that the total open interest (OI) for Bitcoin, Ethereum (ETH), and Solana (SOL) on exchanges had significantly decreased following Bitcoin’s all-time high the previous day.
Bitcoin’s open interest plummeted by $1.46 billion (-12%) within a few hours, while Ethereum’s open interest dropped by $967 million (-15%) and Solana’s tumbled by $424 million (-20%).
This decline in open interest coincided with the sharp drop in Bitcoin’s price. The cryptocurrency briefly reached a new all-time high just above $69,200 on March 5, slightly surpassing its previous peak of $69,044 in November 2021.
Santiment noted that most of the speculation regarding price movements came from traders opening long positions in anticipation of Bitcoin surpassing its all-time high and maintaining a price above $70,000. Additionally, a smaller portion of the market activity came from short positions being liquidated as Bitcoin briefly reached a new all-time high.
Open interest refers to the total number of open positions that traders have taken on derivative contracts. When traders open new positions on futures or options contracts, it increases the open interest, while closing existing positions decreases it.
In recent weeks, open interest had reached record levels as traders placed larger bets on Bitcoin’s price movements as it approached new highs.
Although the sudden decline in Bitcoin’s price may have caused concerns in the market, many experts explained on X that liquidations of derivatives positions are a normal occurrence during price movements.
Prominent crypto trader ‘Daan Crypto Trades’ informed his 363,000 followers on X, “After briefly surpassing the all-time highs, we witnessed a sharp decline that led to the liquidation of many long positions,” further adding, “Approximately $3 billion in open interest was lost during this correction.”
According to data from CoinGlass, approximately 312,500 traders experienced liquidations amounting to $1.13 billion within the past 24 hours.
Currently, Bitcoin is trading at $63,600, representing an 8% decrease from its recent all-time high.
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