Bitcoin Investor Appetite Resumes: Open Interest, MVRV and Leverage on the Rise
• Bitcoin investor appetite has resumed, according to multiple indicators.
• Open Interest and the MVRV ratio is on the rise, while the leveraged positions are being liquidated.
• There is still a risk of a potential downside due to the Digital Currency Group and Genesis solvency issue.
The past several weeks have seen a resurgence of investor appetite for Bitcoin (BTC). Numerous indicators have suggested that the cryptocurrency is on its way to another bull run, with open interest, the MVRV ratio, and leveraged positions all pointing in the right direction. However, there is still a risk of a potential downside due to the Digital Currency Group and Genesis solvency.
CryptoQuant’s analysis of the Bitcoin market on 19 January showed that holders of BTC were shifting their coins from the spot to the derivatives market. As this allowed them to tap into leverage, the open interest in the derivatives market has been steadily increasing since the start of the year. While the estimated leverage ratio dropped off in the first half of January, it was starting to rally at press time.
The CryptoQuant analysis also revealed that Bitcoin’s MVRV ratio was attempting to recover above 1. This is a key indicator of the start of an uptrend. This was backed up by the Puell multiple, which has also been steadily increasing in favor of a positive trend.
Despite the positive market signals, there is still a risk of a potential downside. This is due to the issue of Digital Currency Group (DCG) and Genesis solvency, which has been caused by GBTC mismanagement. If there is a large liquidation event as a result of this, it could cause another major selloff and erode BTC’s latest gains. This might be why the Purpose Bitcoin ETF holdings have been offloading its BTC. Additionally, the number of addresses holding more than 1,000 BTC has only increased slightly since the start of January 2021.
Overall, while investor appetite for Bitcoin is starting to pick up again, there is still a risk of a potential downside. Investors should take caution and do their own research before making any decisions.