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Over the past two weeks, the world's leading cryptocurrency has struggled to finally break the $116,000 price mark while testing the $106,000 support. As Bitcoin consolidates across the $110,000 mark, the most recent on-chain evaluation points to an exciting outlook despite the recent price wars.
Why the Bitcoin price could soon rise
In a QuickTake post on the CryptoQuant platform, XWIN Research Japan, a crypto research institute, examines the potential of a price reversal within the Bitcoin market and says the present consolidation might be representative of wealth creation dynamics. The institution’s bullish guess is predicated on readings from three key on-chain metrics.
First, XWIN Research Japan highlights that there was a pointy decline in open interest across all futures exchanges since its peak in September. For context, open interest is the whole variety of outstanding futures or options contracts which have not yet been settled or closed.
A pointy drop in open interest typically indicates events called “leverage wipeouts,” where speculative positions are forced out of the market. Historically, a simultaneous decline in cryptocurrency open interest and price has often led to market pullbacks, which usually precede sustained price increases on account of growing spot demand.
Source: CryptoQuant
In addition, the academic and research institution uses the “Spent Output Profit Ratio” (SOPR), which records whether investors predominantly sell at a profit or loss. The SOPR has reportedly found stability around 1.0, meaning the vast majority of Bitcoin traders are trading around their cost basis. In a broader sense, this implies that traders are neither making significant profits nor incurring large losses.
According to XWIN Research, that is a superb sign that indicates the tip of the previous capitulation phase and reflects the absorption of supply from short-term holders by demand from long-term holders.
Since all of this is going on beneath the surface, XWIN Research also posits that liquidity may additionally be accumulating in favor of the flagship cryptocurrency. According to the institution, the whole supply of stablecoin ERC-20 has reached an all-time high of around $158.8 billion. The crypto research institute speculates that as market sentiment improves, as much as $158 billion in ERC-20 might be waiting to push the value of Bitcoin higher.
Bitcoin price overview
At the time of writing, Bitcoin is price roughly $109,918, with data from CoinMarketCap showing slight growth of 0.22% over the past day.
BTC is trading at $110,792 on the every day chart | Source: BTCUSDT chart on Tradingview.com
Featured image from Pexels, chart from Tradingview
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