Key Takeaways
What Caused Bitcoin’s Rebound?
BTC rallied after Open Interest dropped to $28 billion, clearing excess debt and improving Taker Buy/Sell Ratio signals.
What could impact BTC next?
Renewed ETF inflows and slowing retail sales could push BTC towards the $100K region in the coming sessions.
Bitcoin has reclaimed the $90,000 region after falling to its lowest level since April on November 20. That drop pushed the Fear and Greed Index to 12, a zone associated with panic selling and heavy liquidations.
Nevertheless, the aftermath appears constructive for Bitcoin [BTC]which could potentially set the pace for a further rally.
Leverage is reset after a major shakeout
Bitcoin has just undergone a washout aimed at rebalancing the market after an extended period of over-leverage by traders.
This led to one of the largest open interest shakeouts of the current cycle CryptoQuant.
Open Interest, which measures the total number of contracts outstanding in the market, fell sharply from $45 billion to $28 billion as traders exited their positions.
Source: CryptoQuant
This liquidation wave cleared out overextended longs and reset positioning.
Additionally, CryptoQuant’s Taker Buy/Sell Ratio stood at 1.06, showing that buy-side volume still dominated after the washout. That supported a short-term recovery story.
Bitcoin ETF flows turned positive again
US Spot Bitcoin exchange-traded funds (ETFs) are starting to register renewed inflows after a prolonged period of outflows.
Between November 12 and 20, $3.16 billion worth of ETFs were sold, with only $75.4 million in net purchases on November 19, leaving a net outflow of $3.09 billion.
In contrast, CoinGlass data showed new inflows of $151 million from November 21.
Source: CoinGlass
The last time such a prolonged outflow was followed by a strong inflow occurred in September 2024. During that period, Bitcoin rose for the first time in history from around $53,900 to $106,000 in December.
It is important to note that macroeconomic and political factors also played a role, especially when pro-crypto Trump won the US elections.
Speaking to AMBCrypto, VALR CEO Farzam Ehsani noted that the renewed inflows could reflect a shift from defensive positioning to new capital allocation.
“The broad inflows into US spot ETFs on Tuesday could be an early signal that institutional liquidity is re-entering the digital asset market after weeks of aggressive de-risking.”
He also believes that macro sentiment could continue to support Bitcoin, adding that investments in sovereign wealth funds could further bolster demand, especially as both the Czech National Bank and Luxembourg sovereign wealth fund have disclosed exposure to Bitcoin ETFs.
Retail remains a barrier
Retail investors are expected to play a key role in Bitcoin’s potential recovery. However, this group has yet to stop selling.
At the time of writing, CoinGlass data showed $373.6 million in retail spot sales, indicating hesitation despite the rebound. Short-term holders (STHs), who typically hold assets for less than 155 days, continued to exit.
Source: CoinGlass
AMBCrypto analyzed the Short-Term Holder Spent Output Profit Ratio (STH-SOPR) to assess the sentiment behind this selling activity.
The STH-SOPR turned positive at 1.066, indicating that short-term holders are selling at a profit.
Profit-taking generally reflects bullish market conditions and supports the view that Bitcoin still has room to move higher.
If retail sales were to cool and institutional inflows were to increase, Bitcoin could attempt another move towards $100,000. At the time of writing, BTC was trading near $91,450.