Bitcoin Faces More Declines: Analyst Insights

Bitcoin's ongoing price struggles might not be finished, as indicated by research from K33. The recent surge in leverage and significant movements into Ethereum have rendered Bitcoin vulnerable to a further dip in the short term. Notional open interest in Bitcoin perpetual futures has climbed to its highest level in two years, now exceeding 310,000 BTC (about $34 billion), with an increase of 41,607 BTC in the last two months alone. A sharp acceleration of 13,472 BTC over the weekend marks a potential turning point, according to K33's Head of Research, Vetle Lunde. This spike, coupled with the rise in annualized funding rates from 3% to nearly 11%, suggests a trend of increasingly aggressive long positions, despite relatively stagnant prices. Lunde draws comparisons to leverage build-ups seen during the summers of 2023 and 2024, both of which resulted in sharp liquidations in August. However, this peak in open interest appears later in the month, signaling a potentially prolonged consolidation phase that could catch dip buyers off guard. 'The risks of long squeezes in the near term are elevated,' Lunde cautioned, recommending a conservative approach until excess leverage is cleared from the market. A significant rotation into Ethereum adds to this volatility. A long-term holder recently traded 22,400 BTC for ETH via the decentralized exchange Hyperunit, driving Ethereum to a new all-time high of $4,956 over the weekend, marking the end of a 1,380-day drawdown and shifting momentum towards Ethereum. The ETH/BTC ratio surged above 0.04 for the first time in 2025, highlighting Ethereum's current strength. Despite Ethereum’s rally against the USD, its long-term relative performance versus Bitcoin shows weakness, with 1-, 2-, and 3-year rolling ETH/BTC returns in negative territory. Historically, peaks in Ethereum's price often coincide with peaks in the broader crypto market. Past cycles in 2017 and 2021 displayed similar patterns where Ethereum surges lead to altcoins rallying while Bitcoin stagnated, raising concerns that the current crypto bull market may be nearing its conclusion. In contrast, Bitcoin's dominance remains strong at 58.6%, higher than the below-40% levels recorded during previous peaks. Although the relationship between past Ethereum ATHs and Bitcoin is concerning, we have not yet reached a point that indicates significant altcoin exuberance, Lunde noted. Institutional flows are showing caution, with CME traders reducing their Bitcoin exposure, and options markets taking a notably defensive approach. Longer-dated skews have entered positive territory for the first time since 2023. In contrast, Ethereum futures are trading at a double-digit premium and have outperformed Bitcoin since early August, in part due to major ETF inflows and corporate treasury accumulation. As Ethereum's relative strength evolves, traders are weighing whether this cycle will align with historical patterns or take an entirely different route. Disclaimer: The Block is an independent media outlet offering news, research, and data. As of November 2023, Foresight Ventures is a primary investor in The Block. Foresight Ventures also invests in various other companies in the crypto space. Crypto exchange Bitget serves as an anchor LP for Foresight Ventures. The Block operates independently to provide objective and timely information about the crypto industry. Here are our current financial disclosures.