Data shows that bitcoin derivatives open interest has recently skyrocketed to a new all-time high (ATH). Here's what this could mean for the asset's price.
bitcoin Open Interest Has Recorded a Sharp Rise Recently
in a x.com/JA_Maartun/status/1798402382574797177″ target=”_blank” rel=”noopener nofollow”>mail On x, CryptoQuant Netherlands community manager Maartunn talked about the latest trend in bitcoin open interest. “Open interest” here refers to the total number of cryptocurrency-related derivatives positions that are currently open across all exchanges.
When the value of this metric increases, it means that investors are opening new positions in the market right now. Generally, the total amount of leverage in the sector increases when this trend forms, which can lead to a higher degree of volatility in the asset price.
On the other hand, a decrease in the indicator suggests that derivatives users are closing positions due to their own violation or being forcibly liquidated by their platforms. Either way, the currency could become more stable after such a drop, due to lower leverage.
Now, here is a chart showing the trend of bitcoin open interest over the past few years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/06/Bitcoin-Open-Interest-Sets-New-All-Time-High-–-Will-Price.jpeg" alt="bitcoin Open Interest” width=”4000″ height=”2250″/>
The value of the metric seems to have been climbing up over the last few days | Source: x.com/JA_Maartun/status/1798402382574797177/photo/1" target="_blank" rel="noopener nofollow">@JA_Maartun on x
As can be seen from the chart above, bitcoin's open interest had increased sharply earlier in the year, when the cryptocurrency's price witnessed its rally towards the new ATH.
In this rise, the indicator had surpassed its record value set during the peak of the 2021 bull run. However, as the price fell to consolidate after the mid-March ATH, the metric also observed a cooldown.
However, with bitcoin's latest rally, the trend has reversed again for Open Interest, as investors have quickly begun to open new positions. The value of the indicator has now exceeded the maximum observed at the beginning of the year, and by a margin.
It would appear that speculation has returned to the market in full force and, as has often happened historically, these extreme levels of open interest could once again result in strong cryptocurrency price action. The direction of these fluctuations, of course, can be in any direction.
As mentioned above, the reason volatility increases after an increase in open interest is due to an increase in leverage. When leverage increases, market sell-offs are more likely. It is these large amounts of liquidations that can cause chaos in the market.
In a previous x x.com/JA_Maartun/status/1798312993794761040″ target=”_blank” rel=”noopener nofollow”>mail, Maartunn had shared how aggregate open interest in the cryptocurrency sector as a whole had been approaching an ATH. Therefore, it appears that bitcoin is not the only currency that has witnessed an increased appetite for speculative activity recently.
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/06/Bitcoin-Open-Interest-Sets-New-All-Time-High-–-Will-Price.png" alt="bitcoin and Cryptocurrency Open Interest” width=”2556″ height=”1996″/>
Looks like the metric's value has been going up recently | Source: x.com/JA_Maartun/status/1798312993794761040/photo/1" target="_blank" rel="noopener nofollow">@JA_Maartun on x
btc Price
At the time of writing, bitcoin is trading around $71,000, up more than 4% over the past week.
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The price of the coin appears to have registered an uplift in recent days | Source: BTCUSD on TradingView
Dall-E Featured Image, CryptoQuant.com, TradingView.com Charts
