Sell ​​orders dominate perpetual futures markets ahead of spot Bitcoin ETF decision: CryptoQuant

Crypto market participants are sidelined, leading to low activity in the derivatives market as the deadline for the US Securities and Exchange Commission's (SEC) decision on spot Bitcoin exchange-traded funds (ETF) approaches.

According to a weekly report from market research platform CryptoQuant, the decline in derivatives market activity is due to the rising cost of opening long positions and the increase in profit-taking among investors.

Sell ​​orders dominate the perpetual futures markets

Bitcoin (BTC) started the year at around $42,400, rose to $45,800 on January 2, and fell back to $41,800 the next day. The price fluctuations were accompanied by relatively low activity in the derivatives markets.

Analysts at CryptoQuant said that open interest in the perpetual futures markets is still at low levels, indicating that BTC investors and traders are refraining from opening long positions following the December 2023 price rally and even started taking profits. This is evident as market debt has fallen to its lowest level since January 2022.

The rising cost of opening long positions also caused traders to refrain from buying in the perpetual futures markets. Prices are currently as high as they were when BTC and Ether reached their all-time highs in November 2021.

That the taker-buy-sell volume ratio remains below one suggests that selling volume is dominating perpetual futures markets as investors focus on locking in profits from recent rallies. Although sell orders are increasing, short-term unrealized profits are still high and this has preceded the price corrections.

Large short-term unrealized gains

Last week, CryptoPotato reported that market participants such as miners and short-term holders were sitting on unrealized profits with margins as high as 30%, adding that while they issued BTC at a profit, rallies typically occurred after short-term losses were realized.

The development came as traders began overpaying to open long positions, threatening to push BTC to $32,000, the price realized by short-term holders.

The crypto community expects BTC to rally after the SEC approved the ETFs between January 8th and 10th, but CryptoQuant has warned that the asset could crash due to current market events, making the highly anticipated announcement would turn into a “sell-the-news” event.

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