Bitcoin’s implied volatility has decreased to its lowest point since 2023.
According to on-chain analysts in a report released on Wednesday, the future movement of Bitcoin’s price will rely on the ongoing accumulation of open interest.
MVRV Ratio Indicates a ‘Wait-and-See’ Strategy
Analyst ‘XWIN Research Japan’ observed that Bitcoin’s Market Value to Realized Value (MVRV) ratio is currently neutral at approximately 2.1. This level suggests that investors are experiencing neither significant losses nor substantial profits.
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This price point is unlikely to incite panic selling or extensive profit-taking. The analyst noted that during such times, a “wait-and-see” mindset generally prevails in the market.
This subdued sentiment is further bolstered by the ongoing decline in the total Bitcoin balance on exchanges, indicating reduced selling pressure. Historically, a drop in exchange holdings has preceded a supply shortage when demand spikes. XWIN Research Japan posits that the market might currently be experiencing a “calm before the storm.”
Open Interest: The Key to Future Movement
Another analyst, ‘Axel Adler Jr’, indicated that a recent sharp price decline led to a 16% drop in Bitcoin’s open interest. This points to a reduced leverage level after a recent deleveraging of long positions.
Axel Adler Jr asserts that Bitcoin’s future price trajectory depends on the direction in which open interest (OI) begins to grow. If long positions rise below a resistance level, the risk of another leverage-induced drop increases. Conversely, if short positions swell during a downturn, the likelihood of an upward move due to a short squeeze heightens.
The analyst believes a clear directional signal will materialize when the risks of leverage accumulation/pressure exceed 40% or fall to a 10% leverage depletion level, indicating a potential reversal.
