Cryptocurrency markets have dumped over $20 billion this week in their largest one-day fall of 2020. Bitcoin is currently holding at support — but will a fall in open interest on BitMEX signal another upturn?

Bitcoin has held at the $9,600 range for the past 24 hours, indicating that the downturn may have slowed somewhat. Analysts expected a further drop to support at $9,300 but, at the time of writing, this had yet to happen. This is a very important level in terms of support, according to the chart specialists.

The big question now is; where is the bottom of this pullback? Technical analysis has proved to be somewhat inconsequential — as there have been conflicting signals and nobody expected such a violent dump this week.

BitMEX Open Interest Below $1 Billion

Analysts had also predicted a pullback once open interest on BitMEX reached a billion dollars, as it had happened historically. Now that it is back below that level, there is renewed hope for a rally revival.

Open interest is the total number of outstanding derivative contracts, such as options or futures, that have not been settled for the asset. At the end of January, BeInCrypto reported that a correction was likely once this target was set and, two weeks later, that correction kicked in.

Since then, Bitcoin has lost around 9nine percent — which still leaves plenty of room for the uptrend to continue. There is further hope that Bitcoin will remain above $9k as failure to do so would likely wipe out most gains that altcoins have made so far this year.

On the low side, support lies at around $8,800. Below that is a strong foundation at $8,200. Anything lower than that invalidates the entire bull run.

So far this year, $1.5 billion has been liquidated on BitMEX — with the biggest hourly liquidations at $118 million this week.

BitMEX Liquidations

According to these charts, longs are still being liquidated over shorts on BitMEX — but the number has fallen dramatically, from almost $150 million yesterday to just under $20 million today. [DataMish]

It could soon be time for the bulls to start regaining their composure. However, Bitcoin must remain above $9,300 for that to happen.

With current global economic pressures intensifying and fears of the COVID-19 (Coronavirus) outbreak spreading like wildfire, there is a strong likelihood of the cryptocurrency rally resuming in the weeks ahead.

Martin Young

Martin has been writing on cyber security and infotech for two decades. He has previous trading experience and has been covering the blockchain and crypto industry for the past three years.

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