Bitcoin Plummets 12% to 45-Day Low, Open Interest Drops 16%

Bitcoin recently experienced a significant drop, falling below the $100,000 mark, which has raised concerns among traders about the potential for a deeper decline. Just a month ago, Bitcoin reached an all-time high of $111,000, with Open Interest (OI) soaring to $80.31 billion. The market was bullish, anticipating new highs and a strong close to the second quarter. However, the market dynamics shifted dramatically, and with just a week left in the third quarter, Bitcoin's price plummeted to $98,385, marking the lowest daily close in 45 days.

Despite this sharp decline, bullish sentiment quickly resurfaced, pushing Bitcoin's price back up to $101,849. This recovery suggests that the market may not be fully pricing in the risks associated with geopolitical conflicts. The recent drop in Bitcoin's price has led to a decrease in Open Interest to $67.71 billion, returning to levels last seen in early May. This indicates a classic leverage flush, where weak hands are wiped out, and the market takes a more defensive stance.

Bitcoin's spot exchange reserves have been steadily decreasing, reaching multi-year lows. Concurrently, Bitcoin's dominance has surged to 65.76%, the highest level in four years. This shift suggests that while the market is cautious, it is not yet in a state of panic. Recent geopolitical events, including U.S. airstrikes on Iranian nuclear sites and escalating tensions in the Middle East, have had a muted impact on risk assets. The S&P futures opened down only 0.5%, and Brent crude oil prices rose modestly by 2.3%. This calm in the market could be setting the stage for a potential volatility shock in Bitcoin.

Despite hitting a 45-day low, total realized profits for the day were relatively low at $753 million, well below the $1 billion threshold that typically signals widespread distribution. This indicates that holders are maintaining discipline and exit liquidity has not been aggressively tapped. The holding trend remains structurally intact, with FOMO (Fear of Missing Out) still outweighing fear. In contrast, past risk events like the "Liberation Day" selloff saw a sharp spike in realized profits due to panic selling.

The Estimated Leverage Ratio (ELR) has dropped to -0.25 in under 72 hours, reaching levels not seen since the 2021 "China Ban" when ELR bottomed at -0.35. This aligns with Bitcoin's 12% drawdown and a $13 billion wipeout in OI, confirming a clear deleveraging event. However, the market is still not taking geopolitical risks seriously. If leverage starts piling back in too soon, the next macro shock could hit much harder than expected, potentially leading to a deeper unwinding of Bitcoin's price, with $98,000 being just the first stop.