FX.co ★ Bitcoin is set up for a sale

Since the massive rally hit an all-time high of $68,990.90 on November 10, prices have declined and have remained below $60,000 for the past few weeks. Some hype seems to have been associated with the launch of the Bitcoin futures exchange-traded fund (ETF).

On October 19, the ProShares Bitcoin Strategy ETF (BITO) appeared on the market. Assets under management (AUM) reached $1.2 billion within two days, and spot bitcoin grew by more than 50% compared to the previous month.

There has also been a growing expectation for several weeks that the US Securities and Exchange Commission (SEC) was going to allow a certain bitcoin-based ETF to start trading, which it did on October 15.

The AUM of the first Bitcoin futures ETF was estimated at about $1.4 billion.

That's about how much it was when Bitcoin prices peaked. It is worth noting that the number of shares in the ETF, which is traded like a stock, has been steadily growing since the launch, with only a couple of net drops. On October 21, there were slightly less than 30,000 shares, and now, there are slightly less than 40,000.

ProShares Bitcoin Strategy ETF (BITO) shares are in circulation compared to Bitcoin prices.

This tells us about the growing interest in storing bitcoins but not as globally as it was a couple of months ago.

Even the open interest (OI) in dollar terms in the perpetual futures market, which began to grow at the end of September, when rumors about the final SEC move began to leak, gradually declined before a sharp drop over the weekend. After peaking at $26.6 billion on October 20, the open interest was about $22 billion by Friday.

Cumulative open interest in BTC futures on 11 exchanges.

Perpetual futures are very short-term futures contracts (calculated in just 8 hours, if not earlier) that allow traders to make huge bets with leverage up to 100 times on short-term price movement.

On November 26, almost all markets collapsed due to concerns about the new COVID-19 Omicron variant. It didn't help that CME's November bitcoin futures contract expired on the same day.

The total open interest dropped below $19 billion as Bitcoin prices dropped by about 9%. Nevertheless, the first cryptocurrency did not stay in place, but grew, as did the value of open interest. The $200 million liquidations on November 26 were not even the largest amount in November. This week, the daily liquidations on Bitcoin futures and perpetual contracts markets for November-December 2021 came.

From a bitcoin perspective, open interest remained stable and high. High open interest in Bitcoin did not lead to a sharp surge in volatility until this weekend. This is due to the fact that the percentage of open positions on futures contracts with a margin on coins has been decreasing since May and fell below 50% in October. Coin margin futures tend to compound losses during market downturns, leading to more liquidations and deeper price drops.