Data shows the Bitcoin Open Interest has reached yet one more all-time high (ATH), an indication that more volatility may very well be coming for BTC.
Bitcoin Open Interest Has Reached A Fresh High Recently
As identified by CryptoQuant community analyst Maartunn in a latest post on X, the BTC Open Interest has shot up recently. The “Open Interest” here refers to a metric that keeps track of the full amount of derivatives positions related to Bitcoin which might be currently open on all exchanges.
When the worth of this indicator goes up, it means the derivatives users are opening up fresh positions available on the market. Generally, the general leverage within the sector rises when this happens, so a rise within the Open Interest can result in more volatility within the asset’s price.
Then again, the metric registering a decline suggests the investors either are closing positions of their very own will or are getting liquidated by their platform. The cryptocurrency may develop into more stable following this trend, on account of the reduced leverage.
Now, here’s a chart that shows the trend within the Bitcoin Open Interest over the previous few months:
The worth of the metric appears to have been heading up in recent weeks | Source: @JA_Maartun on X
As displayed within the above graph, the Bitcoin Open Interest has been following an uptrend over the previous few months, but recently, the indicator’s rise has been particularly sharp.
This rapid growth within the indicator, through which it has been setting record after record, has coincided with BTC’s explosive rally to latest all-time highs (ATHs). The event isn’t anything unusual, as periods of sharp price motion are inclined to attract numerous attention, and with such interest naturally comes speculation on exchanges.
The size of the rise that the indicator has seen, nonetheless, may very well be something concerning. Historically, at any time when the Open Interest has risen too high, a mass liquidation event (popularly generally known as a squeeze) has generally followed. In such events, a swing in the worth liquidates a considerable amount of overleveraged positions directly, kicking off a form of feedback cycle where the liquidations amplify the worth move and cause much more liquidations.
In theory, the volatility emerging out of a squeeze can take the cryptocurrency in either direction, but in bullish periods, an overheated derivatives market normally unravels in a correction for BTC, as long positions are inclined to accumulate when the worth rallies.
Throughout the previous few days, the Open Interest had seen a bit off a cooldown, however it seems speculators have returned to start out the brand new week because the metric has just witnessed one other leg up. It now stays to be seen how Bitcoin would develop in the approaching days and if one other squeeze would happen.
BTC Price
On the time of writing, Bitcoin is trading at around $90,500, up almost 10% during the last week.
Looks like the worth of the coin has been consolidating in the previous few days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com