An orderly reset
Bitcoin derivatives are experiencing something as rare as voluntary profit realization of a magnitude only comparable to the most massive liquidation cascades of the past. May BTC keep pulling higher with the most aggressive risk-takers having exited?
Preview
Bitcoin returned to consolidation this week, posting its highest weekly close since January and holding above all major moving averages. Still, crypto is being held back by the same force weighing on most markets: soaring US yields, with the 5-year above 5% and the 10-year above 5.2%, both 19-year highs. Treasury intervention has so far been too small to matter, and the Fed is hiking to fight inflation. For now, surging yields are pushing investors away from risk, though mounting pressure may eventually force more aggressive Treasury action, an interesting setup for BTC.Beneath the surface, BTC's market structure looks highly encouraging. Open interest has fallen by 49k BTC in an unusually orderly reset driven by profit realization, while spot volumes stayed below yearly averages despite higher prices, a sign of sustained sell-side exhaustion. With little leverage left to trigger forced liquidations and holders reluctant to sell 33% below ATH, we see considerable upside asymmetry.Third largest daily OI decline on CMECME OI fell by 16,075 BTC yesterday, its third-largest daily decline ever. The September expiry did the damage, with 15.79% of OI held to settlement, the highest share since June 2023. Weak carry explains most of it. The October contract trades at a 5.1% basis, down from the brief spike during the September 21 rally, leaving basis traders with little reason to roll. Some longs likely also took profits and walked. Historically, this combination has been constructive: high settlement shares and a weak basis have preceded a median 30-day return of 8.9% since 2022, versus 2.4% acro
