Bitcoin rally? Post-washout conditions look bullish, UNLESS…

Key Takeaways

What triggered Bitcoin’s rebound?

BTC recovered after Open Interest fell to $28 billion, clearing excess leverage and improving Taker Buy/Sell Ratio signals.

What could influence BTC next?

Renewed ETF inflows and fading retail selling may guide BTC toward the $100K region in the coming sessions.

Bitcoin reclaimed the $90,000 region after dropping to its lowest level since April on the 20th of November. That slide pushed the Fear and Greed Index to 12, a zone associated with panic selling and heavy liquidations.

Despite this, the aftermath appears constructive for Bitcoin [BTC], potentially setting the pace for a further rally.

Leverage resets after a major shakeout

Bitcoin has just gone through a washout, aimed at rebalancing the market after an extended period of over-leveraging by traders.

This led to one of the most significant open interest shakeouts of the current cycle, according to CryptoQuant.

Open Interest, which measures the total number of outstanding contracts in the market, fell sharply from $45 billion to $28 billion as traders exited positions.

Source: CryptoQuant

This liquidation wave cleared overstretched longs and reset positioning.

On top of that, CryptoQuant’s Taker Buy/Sell Ratio printed 1.06, showing that buy-side volume still dominated after the washout. That supported a near-term rebound narrative.

Bitcoin ETF flows turned positive again

U.S. Spot Bitcoin exchange-traded funds (ETFs) have begun to register renewed inflows following a prolonged period of outflows.

Between the 12th and 20th of November, ETFs saw $3.16 billion in selling, with only $75.4 million of net buying on the 19th of November, leaving a $3.09 billion net outflow.

By contrast, onward from the 21st of November, CoinGlass data showed $151 million in fresh inflows.

Source: CoinGlass

The last time such extended outflows were followed by strong inflows occurred in September 2024. During that period, Bitcoin rallied from around $53,900 to $106,000 for the first time in history by December.

It is important to note that macroeconomic and political factors also played a role, particularly with pro-crypto Trump winning the U.S. election.

Speaking to AMBCrypto, Farzam Ehsani, CEO of VALR, noted that the renewed inflow could reflect a shift from defensive positioning to fresh capital allocation.

“The broad-based inflows into U.S. spot ETFs on Tuesday may represent an early signal that institutional liquidity is re-entering the digital asset market after weeks of aggressive de-risking.”

He also believes macro sentiment could continue to support Bitcoin, adding that sovereign fund investments may further strengthen demand, particularly as both the Czech National Bank and the Luxembourg sovereign wealth fund have publicly disclosed exposure to Bitcoin ETFs.

Retail selling remains a drag

Retail investors are expected to play a key role in Bitcoin’s potential rebound. However, this group has yet to stop selling.

At the time of writing, CoinGlass data showed $373.6 million in retail spot selling, indicating hesitation despite the bounce. Short-term holders (STHs), who usually hold assets for under 155 days, continued to exit.

Source: CoinGlass

AMBCrypto analyzed the Short-Term Holder Spent Output Profit Ratio (STH-SOPR) to assess the sentiment behind this selling activity.

The STH-SOPR turned positive, with a reading of 1.066, suggesting that short-term holders are selling at a profit.

Profit-taking typically reflects bullish market conditions and supports the view that Bitcoin still has room to trend higher.

If retail selling cooled and institutional inflows strengthened, Bitcoin could attempt another move toward $100,000. At press time, BTC traded near $91,450.