Bitcoin's monthly close was muted, but the real story lies in the derivatives market, where a gaping hole in open interest suggests the recovery is far from complete. Analysts are watching closely as key price levels are tested.
What to know
- Bitcoin ended May at $73,560, a 3.40% decline for the month.
- Total open interest in Bitcoin derivatives remains more than 24,000 BTC below levels seen before a major shakeout in October.
- That October event saw roughly 71,000 BTC (worth about $11 billion) wiped from open interest across major exchanges.
- The persistent gap indicates many traders are still hesitant to re-enter leveraged positions.
- Prominent analyst PlanB described the market as roughly split on whether the February low near $60,000 was the cycle bottom.
- PlanB himself believes the slide may not be over, based on the data.
- The lack of open interest recovery adds to concerns of a prolonged downtrend, with some analysts warning of further downside through 2027.
The Price Picture: May's Close and the Derivative Hangover
Bitcoin's price action in May was tepid at best. The world's largest cryptocurrency closed the month at $73,560, a decline of 3.40%. While that is not a catastrophic drop, the underlying derivatives market tells a more concerning story. Total open interest has not recovered to the levels seen prior to a violent shakeout last October, leaving a gap of more than 24,000 BTC. This number is a stark reminder that the market has not fully healed.
The open interest gap is a signal that many traders are still sitting on the sidelines. Open interest represents the total number of outstanding derivative contracts, such as futures and options. A decline in open interest often indicates a lack of conviction or a reduction in leveraged speculation. When a significant portion of that open interest is wiped out in a sudden event and fails to return, it suggests a lasting shift in market sentiment.
Anatomy of a Shakeout: The 71,000 BTC Wipeout
To understand the current situation, we need to go back to last October. That month, Bitcoin's derivatives market experienced a violent shakeout. Roughly 71,000 BTC worth around $11 billion was wiped from open interest across major exchanges. The event was sudden and brutal, liquidating leveraged positions and forcing a recalibration of risk.
Since then, open interest has only partially recovered. The 24,000 BTC gap represents a significant portion that has not returned. This is unusual because historically, after such liquidations, open interest tends to rebuild relatively quickly as new speculators enter. The fact that it has not suggests a deeper wariness.
"Total open interest has not recovered to pre-event levels, leaving a gap of more than 24,000 BTC that signals many traders are still sitting on the sidelines."
PlanB's View: A Market Divided
Among the analysts weighing in, PlanB — known for his stock-to-flow model — has offered a blunt assessment. He stated that the market is roughly split on whether the February low near $60,000 marked the bottom of this cycle or whether a steeper drop is still ahead. PlanB said he believes based on his reading of the data that the slide may not be over.
This is not a forecast of a specific price target, but an expression of probability. PlanB sees higher odds of a drop below $61,000 rather than a recovery from current levels. His analysis taps into the open interest data as a key indicator of market health.
What the Missing Open Interest Tells Us
The missing 24,000 BTC in open interest is not just a statistic; it represents real capital and sentiment. Traders who were burned in the October shakeout may be permanently cautious. New traders are not stepping in to take their place. This creates a fragile environment where even moderate selling pressure can cause outsized moves, because there are fewer buy orders and less liquidity.
The caution is not unwarranted. Related Reading from other analysts has warned that Bitcoin faces a prolonged downtrend through 2027, with derivatives damage still visible. The combination of a skeptical trader base and a large overhead supply from those who bought at higher prices sets the stage for continued weakness.
Looking Ahead
The next major test for Bitcoin will be whether it can defend the $60,000 level. If that support breaks, PlanB's scenario of a deeper slide could materialize. On the other hand, a surprise recovery in open interest could signal a shift in sentiment. For now, the derivatives market is sending a clear message: caution prevails.
Investors and traders should watch open interest data closely. A return to pre-October levels would be a strong bullish signal. Until then, the gap remains a reminder that the market is still healing.
