Crypto Analyst Explains Key Market Dynamics

CrediBULL, the famous cryptocurrency analyst, pointed out the general misperception regarding open interest (OI) and its price action in cryptocurrency market, mainly in Hedera (HBAR). In a recent X post, the analyst was intended to provide clarity on perpetual misunderstandings that he espy concerning market dynamics.

CrediBULL particularly disproved the widely held notion of “open interest which always increases with every price rise” which majority of people consider as a gauge for healthy market movement. He emphasized that in a rising market, sitting out to wait for OI to rise may not be a smart move. For the evidence, he used the examples of the recent price dynamics of HBAR as a case story.

HBAR Market Trends: Surprising Decline In Leveraged Positions

Discussing the market activity of HBAR, CrediBULL noted that the price of HBAR has been rising consistently, with perpetual futures participation being almost non-existent, as per the flat or negative cumulative volume delta (CVD) for perpetual contracts. Surprisingly, although price increased, the OI went down, implying a decline in leveraged positions which are typically interpreted as a step closer to market stabilization and maturation.

Source: Chart by CrediBULL

CrediBULL categorizes this case as a “totally price driven rally” that he claims is the most preferred type. Spot-driven rallies are mainly the result of actual purchase of cryptocurrencies wherein the spotlight is on speculation rather than leveraged bets. Buyers in such rallies are usually referred to as but more “sticky”- they tend to keep their position for a longer time and are less sensitive to short-term price movements than leverage users.

Further, the analyst pinpointed that spot buyers do not suffer from such risks as perpetual buyers, which are, in particular, forced liquidations that can accentuate market volatility in bear markets. Such differentiation between spot-driven and perpetual-driven rallies provides understanding as to the nature of the cryptocurrencies markets and the different impacts of market participation types on the price stability and market health.

Analyst’s comprehensive report is the educational tool for traders and followers of the market. The aim is to debunk myths and explain what defines a healthy and sustainable rally in price in the crypto space. His comments suggest that the further investigation of market participation type and its effect on price dynamics is a necessity to anyone who is interested in the cryptocurrency market.