On August 27, on-chain analytics provider Santiment reported that the recent “mild” drop in Bitcoin’s price was enough to trigger a larger decline in total open interest on exchanges.
However, Ethereum and Solana’s OI has barely decreased, he added.
Open interest is a measure of the number or value of Crypto derivatives Contracts that have not yet settled and remain open. Can also be used to gauge market sentiment in spot markets.
Capital rotation?
Santiment made some observations based on the OI changes. He stated that there is a “shift in focus towards altcoins” as traders see increasing potential in ETH, SOL, and others to recover since the market crash earlier this month.
Since the August 5 crash, Ethereum has recovered around 23% of its value, while Solana has regained 45%. Other altcoins, especially those based on artificial intelligence, have rallied even further, with many reaching pre-crash levels.
The small drop in BTC was also noted:
“This may be a sign that there is a capital rotation from Bitcoin to altcoins by large traders, who are diversifying risk and seeking higher returns.”
However, most altcoins have fallen by similar amounts today.
📉 While the price of Bitcoin has seen a slight drop of -2.2% over the past 24 hours, it was enough to trigger a much larger drop of -7.5% in total open interest on exchanges. For comparison, total open interest towards Ethereum and Solana has barely decreased. Some takeaways:
🎯 Shifting the focus to… image.twitter.com/vBltUQxcnX
— Santiment (@santimentfeed) August 27, 2024
Santiment added that traders were “possibly reducing exposure” due to uncertainty, and concluded that the larger drop in BTC open interest, compared to smaller assets, “points to traders potentially seeing the August rally coming to an end and looking to sell the top.”
Several analysts have suggested That alternate season could be right around the corner, as reported by Cryptopotato on August 26th.
Trader and analyst ‘Stockmoney Lizards’ said that altcoins still need to suffer a bit more in a post on X on August 26.
They added that Bitcoin dominance can increase to 60-70% after the halving before altcoins start outperforming BTC. It is currently at 57.53%, according to Tradingview.
#Altcoins There is still a bit more pain to be had. BTC.Dominance can increase up to 60-70% after the halving before alts start to outperform Bitcoin. image.twitter.com/qLNk4WAHRh
— Stockmoney Lizards (@StockmoneyL) August 26, 2024
Cryptocurrency markets retreat
Besides, markets are retreating again today after peaking in monthly total capitalization at $2.37 trillion on August 25. Total capitalization has fallen 2.6% over the past 24 hours to $2.31 trillion at the time of writing.
Bitcoin price has been on a steady downtrend, falling as low as $62,750 during the Asian trading session on Tuesday morning. It currently appears to be returning to its range-bound zone around the $60,000 price level.
Ethereum fell 2.4% on the day to $2,680, while the rest of the altcoins were predominantly in the red.
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