Cryptocurrency traders who used options and futures to invest in Bitcoin (BTC) are facing substantial losses of $1 billion following a sharp decline in the cryptocurrency’s price. On March 5, Bitcoin reached a new all-time high of $69,200, but then dropped more than 14%. According to on-chain analytics provider Santiment, the total open interest (OI) on exchanges for Bitcoin, Ethereum (ETH), and Solana (SOL) significantly decreased after Bitcoin’s all-time high. Bitcoin’s open interest fell by $1.46 billion (-12%), Ether’s dropped by $967 million (-15%), and Solana’s tumbled by $424 million (-20%). The decline in open interest coincided with the sharp drop in Bitcoin’s price. The majority of speculation on Bitcoin’s price came from traders opening long positions in anticipation of it breaking through the all-time high and maintaining a price above $70,000. Some short positions were also liquidated when Bitcoin briefly touched the new all-time high. Open interest refers to the total number of open positions on derivatives contracts. Traders opening new positions increase open interest, while closing existing positions decreases it. In recent weeks, open interest had reached record levels as traders bet on Bitcoin’s price action before the decline. Despite the market uncertainty caused by the sudden drop in Bitcoin’s price, many experts consider derivatives flush-outs to be a normal part of price movements in the cryptocurrency market. The decline in Bitcoin’s price resulted in approximately $1.13 billion worth of liquidations, affecting around 312,500 traders. Currently, Bitcoin is being traded at $63,600, representing an 8% decrease from its recent all-time high.
Bitcoin's sudden drop erases $1 billion of 'speculative excess' from markets.