Bitcoin, Crypto OI & Market Leverage is Declining: Citi

Paigambar Mohan Raj
Source: CryptoSlate

2022 has been one of the worst years for the crypto industry. Bitcoin (BTC) has fallen by nearly 75%, now trading at two-year lows. Not only did the markets crash astronomically, but we also witnessed the collapse of major firms such as Terraform Labs, Three Arrows Capital, and the most recent, FTX. Hence, it goes without saying that investor sentiment is at one of its lowest.

In a recent report, global financial giant Citi said that institutional interest in crypto has declined. According to analyst Joseph Ayoub,

“Leverage, volatility and interest have faded as investors battle with declining prices.”

Ayoub also added that retail interest, along with institutional interest, has also declined. The fall in interest is attributed to the fall in prices and a series of negative impacts on the crypto industry. Ayoub says that the decline in interest coincides with a decline in volatility.

Crypto open interest and market leverage at lows

The report stated a sharp fall in open interest in Bitcoin (BTC). It was about $23 billion when the year began, but it is now just about $9 billion. Leverage has also significantly decreased. Open interest, which indicates active positions, is the total number of outstanding derivative contracts of investors.

Citi’s report is supported by the data available on CryptoQuant, which shows the original crypto’s open interest at yearly lows.

Source: CryptoQuant

CryptoQuant also supports the decline in the estimated leverage ratio.

Source: CryptoQuant

Despite declining cryptocurrency values, spot trading volume has held steady, and since FTX’s demise, volumes on decentralized exchanges (DEX) have increased. The report stated that the failure of FTX has further strengthened policymaker calls for crypto regulation, with a greater emphasis on consumer safety.

At press time, Bitcoin (BTC) was trading at $17,833.42, up by 2.3% in the last 24 hours. On the other hand, the global crypto market cap stood at $910 billion, up by 2.2% in the last 24 hours.