Bitcoin’s price is fluctuating below the $90,000 mark as volatility increases across the entire cryptocurrency market. During the bearish price action, attention is now being shifted to the cautious signal from the Bitcoin Open Interest in BTC terms, which has remained below past all-time high in years.

Open Interest Tells A Different Story When Measured In BTC

Amid the ongoing volatile action of the crypto market, the derivatives market for Bitcoin is providing a more subdued message. This message is unfolding on the Bitcoin Open Interest (OI) in BTC terms as outlined in a recent research by Joao Wedson, a market expert and founder of the Alphractal analytics platform.

In the report shared on the X platform, the market expert highlighted that the open interest measured in BTC terms has failed to reach new all-time highs since 2022. The BTC-based perspective shows a more restricted usage of leverage over cycles, whereas dollar-denominated measures frequently climb in tandem with price.

On Thursday, the metric experienced a bounce, but Wedson stated that the upward move was mainly in USD-dominated open interest. This pattern suggests that traders are becoming more cautious in the market by allocating capital more carefully as opposed to putting it all into risky positions.

According to the expert, the trend simply suggests that speculation is present in the market and it’s currently expanding. However, the chart shows that the broader market is still far from any form of extreme or irrational euphoria. 

Not Enough Profit To Trigger A Bullish Recovery

BTC’s inability to produce another major rally is linked to the level of investors in profit. Darkfost stated that there are still not enough investors in profit to hope for a sustainable bullish recovery. Thus, it is crucial to understand that latent profits are not harmful to a market; it is quite the opposite.

When investors are most in profit, the situation is much more comfortable, which motivates them to hold. However, this only holds up to a certain point. Also, when the supply in profit surpasses 95% or even 100%, latest profits begin to impact the market and may trigger essential corrective phases.

The ongoing correction remained moderate with a drawdown to around 31%, but it was able to sharply reduce the percentage of supply in profit, suggesting very late entry by many investors. Currently, over 71% of BTC is in profit after dropping as low as 64%, a very concerning level that has typically been observed only when Bitcoin was entering a bear market. 

However, in Darkfost’s view, the market must reclaim above 75% supply in profit to regain a more stable structure. As long as it stays above this level, the supply in profit has historically been associated with positive periods, as shown in the chart. 

With the recent price rebound, the supply in profit saw a brief climb back to 75% before getting rejected. Meanwhile, many BTC investors possibly used this opportunity to exit at break-even or to cut their losses.

With the latest bounce on Tuesday, the Bitcoin price has moved back above the $94,000 level, which appears to have reignited bullish sentiment across the market. A confirmed indication of the renewed bullish sentiment is the recent drop in selling pressure from investors and the futures market.

Futures Market Sellers Are Stepping Back

The cryptocurrency market is showing upward strength with Bitcoin reclaiming resistance levels that previously halted its upside attempts. While the price of BTC is trending upwards once again, selling pressure on the flagship asset from the futures market is declining sharply.

Following weeks of aggressive short positioning and high funding rates that exacerbated downward movements, indicators currently reflect a substantial cooling of sell-side activity. As outlined by Darkfost, a market expert and author at CryptoQuant, the selling pressure has now divided by 10 after reaching a monthly average peak of $489 million in the BTC Net Taker Volume metric.

This shift in sentiment is a sign that open interest is returning to normal, liquidations have slowed, and traders are reducing rather than increasing their negative wagers. Although this does not guarantee an immediate rise in BTC’s price, it alleviates one of the biggest headwinds that has affected prices in recent sessions.

The Bitcoin Net Taker Volume metric provides a net volume, which aids in determining who is controlling the futures order books. Furthermore, it is simpler to identify changes in trend and trading activity when the data is smoothed using a monthly average. Currently, Darkfost highlighted that sellers are still slightly dominating the orders, with over $51 million worth of trades. 

While the metric has not yet flipped into positive territory, the data shows that it is gradually approaching it. According to the expert, it is quite encouraging when traders begin to change their approach, especially considering the significant impact futures volumes have on price action.

It is worth noting that the BTC price action has experienced a stable trend since the decline in selling pressure kicked off. Thus, if Net Taker Volume were to turn positive once more, it would undoubtedly set off a bullish reversal for Bitcoin.

Is Bitcoin Volatility Heading For Rock Bottom?

As the bullish sentiment returns to the market, the ongoing volatility is starting to fade, leading to a period of low risk. Axel Adler Jr., another author at CryptoQuant, has shared an update revealing that BTC’s realized volatility has compressed significantly, reaching approximately 23%, a level that statistically rarely persists for long.

In the past, these compression regimens have resulted in a dramatic range expansion. With realized volatility now sitting at 23.6%, compression has reached a critical threshold, bringing BTC to a crucial stage that could play a role in its next move. 

At the time of writing, the price of BTC was trading at $94,890, indicating a more than 3% increase in the last 24 hours. Its trading volume has also increased significantly, rising by nearly 61% over the past day.