bitcoin open interest has arose surpassed $11 billion for the first time in more than two years. This rally comes as the world's most valuable currency soars, recently surpassing $51,000, the highest level since December 2021.
Rising open interest and order book imbalance
According to Kaiko, a leading crypto analytics provider, this increase in open interest comes at a critical time for the coin. When prices surpassed $48,000 on February 11, there was an imbalance in the order book. Kaiko then noted that there were $100 million more offers than orders.
Technically, whenever there is an imbalance in the order book with more offers than asks, it suggests that buyers are more willing and excited to buy at spot prices that sellers are willing to liquidate. As a result of this imbalance, prices skyrocketed in the following days, surpassing the psychological number of $50,000 to over $51,500 when I wrote on February 14.
The rising open interest, especially as the market trends higher, is bullish. It means that more people are willing to participate in the market, hoping to follow the trend. Subsequently, their participation translates into a more liquid market, gaining upward momentum.
bitcoin is rising thanks to strong inflows into spot bitcoin exchange-traded funds (ETFs). In recent weeks, spot bitcoin ETF issuers have been rapidly accumulating the currency. The largest so far is BlackRock's IBIT, which holds more than 70,000 btc.
As a result, prices are slowly rising, reflecting high demand linked directly to institutional participation. This positive sentiment and expectations of even more price gains, translating into higher open interest, come despite the continued liquidation of the Grayscale bitcoin Trust (GBTC). Following court approval, GBTC becomes an ETF, joining others like Fidelity, which also offer a similar product.
Genesis looking to sell GBTC; Will bitcoin recover in March?
Even with the high optimism, a potential cloud hangs over the bitcoin market. Genesis, a bankruptcy-protected cryptocurrency lender, wants the court to allow it to sell more than $1.4 billion in GBTC.
If the court gives the green light to this move, btc could come under more selling pressure, possibly undoing recent gains. So far, FTX's estate sold its GBTC, which is estimated to be worth more than $1 billion, coinciding with bitcoin's decline to just $39,500 in January.
In addition to these bitcoin-specific events, the market is closely monitoring how the monetary policy scenario in the United States will evolve in the coming weeks. The US Federal Reserve is expected to cut rates in March, a potentially beneficial move for btc.
Featured image of DALLE, TradingView chart
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