Bitcoin’s open interest has fallen sharply in the last month, with an analyst suggesting that this decline could lay the groundwork for a recovery.

Bitcoin’s open interest, currently valued at around $114 billion with BTC trading at $87,500, has experienced its steepest 30-day decline, dropping approximately 1.3 million BTC. Analyst Darkfost shared insights on CryptoQuant, pointing to this drop as significant for the cryptocurrency.

As Bitcoin’s price has dipped over the past few weeks, traders have been adjusting their strategies to manage risk. Darkfost emphasized that such cleansing periods are often pivotal in establishing a solid base for future growth.

“Historically, these cleansing phases have often been essential to forming a solid bottom and setting the stage for a renewed bullish trend. Deleveraging, forced closures of overly optimistic positions and a gradual decline in speculative exposure help rebalance the market.”

Darkfost noted that the last time Bitcoin’s open interest dropped this rapidly was during the 2022 bear market, underlining the current situation’s importance.

Bitcoin’s price has decreased by 20% in the past month alone, following a significant peak earlier this year.

Potential for a Bullish Market

Crypto analyst and founder of MN Fund Michaël van de Poppe believes that the coming week will be crucial for Bitcoin’s price trajectory. He mentioned on social media that if BTC can rebound and stabilize between $90,000 and $96,000, the likelihood of reaching new all-time highs would increase significantly.

“Fear and panic are max during the past days. Those are the best opportunities in the markets,” he remarked.