Bitcoin fell below $87k on Sunday, the 25th of January, after U.S. President Donald Trump threatened a 100% tariff on Canada and a U.S. government shutdown, and news came out that a government shutdown was expected.
This drop prompted a cascade of liquidations.
In the past 24 hours, $677.1 million worth of positions were liquidated in crypto, according to CoinGlass data. Of them, $606.2 million were long positions.
Bitcoin is in the grip of the bears
In a post on X, analyst Darkfost highlighted the falling Open Interest behind Bitcoin [BTC]. This decline has been progressing since November, which did not support the emergence of a new trend.
The first week of January saw an uptick in OI, but it was only a brief bounce.
If the Open Interest begins to rise, it could be indicative of a trend reversal toward bullish, but this is not the case yet. As things stand, the Derivatives market deleveraged as Bitcoin continued to trend lower.
The Taker Buy/Sell Ratio measures which side is dominant and how aggressive they are. As the ratio drops below 1, it reflects that bears are the majority of the takers, or market orders, and are responsible for driving the price.
The 7-day moving average of the metric has been under 1, except for the first week of January.
On-chain risk metrics worsened
Another analyst, Axel Adler Jr, agreed with these findings, stating that the previous week was an “accelerated deterioration mode” for BTC. The Net UTXO Supply Ratio fell below 0.50 over the past week, into an “elevated risk zone”.
It degraded from the fairly confident 0.452 value on the 19th of January to 0.319 on the 25th of January. Any bounces in between were insubstantial within the broader downward impulse.
If real demand does not appear, the analyst warned, the probability of continued weakness and further lows remains high.
Traders and investors should remember that the broader market sentiment was fearful and should navigate this week’s trading accordingly.
Final Thoughts
- Threat of a government shutdown and tariffs on a U.S. neighbor spooked the market in the late hours of Sunday, exacerbating bearish sentiment.
- The onchain metrics agreed that sellers were dominant, and any short-term price bounce was part of the downward impulse of the past week.
