Bitcoin Clears Longs, Putting Late Shorts At $70K At Liquidation Risk

BitcoinBTCFutures data indicates that traders with new short positions exceeding $70,000 could face liquidation due to a Monday wave of closing leveraged positions.

Open interest on the Bitcoin futures markets fell by -2.46 % on Monday after a rise of 8.9 % on March 31. This suggests a decrease in leverage.

Analysts estimate that almost 90% of Bitcoin’s downside is already priced in. 

Bitcoin futures leverage reset is met with rising short bias

Bitcoin researcher Axel Adler Jr noted This is the change weekly in Bitcoin Futures Open Interest (OI) in BTC. On March 31, the metric reached a peak of 8.9% as the price rose above $73,000. The metric flipped from 8.9% to -7.2% on April 4th, the biggest drop in the last three months. On Monday, the seven-day difference stands at -2.46 % with the OI total near 318,000 BTC.

This shift to negative territory took place on Sunday and the phase of deleveraging is in its initial stages. Adler stated that the BTC prices holding at $70,000 or higher during the contraction indicates that most of the long-side leverage was closed, without cascading liquidity that would have crashed the BTC value.

OI doesn’t distinguish between forced liquidations and voluntary closures, therefore the action is described as an overall reset of leverage.

The second layer is the funding rate data. The average seven-day funding rate for Binance, Bybit, and OKX dropped from 0.33% to -0.1738% on April 13th.

Bybit’s and OKX’s negative values are more pronounced, indicating a strong short-side bias. Negative funding is when sellers pay buyers to keep positions.

The short position is under increasing pressure if the prices remain stable. This is because the positions are skewed against the uptrend.

Shorts entered the market after long positions were forced to exit. Stability above $70,000 in spite of the shift can create conditions that allow late short exposure to be squeezed.

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Data shows that Bitcoin remains undervalued

MN Capital Founder Michaël van de Poppe pointed Three long-term indicators are at their lowest levels. Puell Multiple Z-Score compares three indicators. Bitcoin The miner’s revenue compared to the historical averages is now at its lowest level in over a decade. Near the 2018 2020 and 2022 BTC prices bottoms, similar levels were seen.

It is the lowest it has ever been. The Z-Score for spent output profit (SOPR), which measures whether coins were sold with a profit, or at a loss. This shows widespread realisation of losses. It is often observed near the exhaustion phase. 

The market-value-to-realized-value (MVRV) Z-Score has also printed its weakest reading ever, placing the BTC price near aggregate cost-basis zones.

These metrics indicate that many investors no longer have large profits and the euphoric purchasing of earlier has been cooled.

This reset is often the result of heavy trading, when short-term traders sell their positions. Coins are then shifted to holders who have a long-term perspective.

Although the prices between $64,000 to $66,000 are showing signs of liquidity, $74,000 is still a high ceiling. Van de Poppe said, 

“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.”

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