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Bitcoin holds $20,000, but analyst says BTC open interest has room for ‘more deleveraging’

Bitcoin (BTC) price continues to struggle at $20,000 and repeated drops below this level have led some analysts to predict a deeper drop in the near term.Earlier in the week, independent market analyst Philip Swift murmured The Crypto Fear & Greed Index’s back-to-back drop to ‘Extreme Fear’ reflects softening sentiment among investors.

On August 29th, analytics firm Delphi Digital highlighted that Bitcoin open interest hit a new all-time high, stating:

“Following the market-wide collapse on August 26, the BTC futures open interest leverage ratio reached a record high above 3% of BTC market cap.”

According to Delphi Digital, “Higher values ​​indicate higher open interest relative to market size. This means higher risk of market compression, liquidation cascades, or event delivery.”

Bitcoin open interest.Source: Delphi Digital

The exact reason that catalyzes such an event remains unclear, but if the current stock downtrend continues with the Dow and the S&P 500 taking losses at the end of August after a fourth day of declines, bitcoin may continue to put pressure on the price of The Dow fell 4.1% in August, while the S&P 500 and Nasdaq ended the month down 4.2% and 4.6%, according to CNBC data.

Cleveland Federal Reserve Governor Loretta Mester also commented that she expects the benchmark rate to exceed 4%, suggesting that rate cuts are highly unlikely throughout 2023. 2.5% range.

How the cryptocurrency market has performed since the Federal Reserve first started raising rates on July 26, 2022, and the fact that BTC and the stock market reflect a strong correlation. Considering that, it wouldn’t be surprising to see a long-term decline in the Bitcoin price. over the next few months.

RELATED: Potential Bitcoin Price Double Bottom Could Push BTC Rally To $30,000 Despite “Extreme Fear”

On the other hand, traders still seem bullish on upcoming mergers. Ether (ETH) and Ethereum (ETH) staking-related tokens have performed relatively well since recovering from last week’s plunge. After falling to $1,422 on August 28, Ether is trading just below $1,600, rising 11.3%. His largest ETH staking service, Lido (LDO), rose 12% on the day, up 32% from last week’s drop to $1.55.