The Bitcoin Open Interest has experienced a significant decrease as of late, which might be a good sign for the ongoing rally.
Bitcoin Open Interest Has Cooled Down From Recent Overheated Levels
A crypto market analyst noted in a CryptoQuant update that the level of Bitcoin derivative contracts open for trading on all exchanges has decreased, which is what’s referred to as the “open interest” in this context.
When the open interest for this metric grows, it typically indicates that investors are currently initiating new positions in the derivative market. This added activity increases the overall market leverage. Consequently, an uptick in open interest may result in heightened volatility for the underlying asset.
An opposite trend in the indicator may signify that derivative users are choosing to close their positions or being compelled to do so through liquidation by their platforms. Regardless, the market might exhibit greater stability following this decrease due to reduced leverage.
Now, here is a chart that shows the trend in the Bitcoin Open Interest since the start of the year:
The graph shows that Bitcoin Open Interest grew in tandem with its price during the recent rally, which was driven largely by the use of spot exchange-traded funds (ETFs).
During this recent surge, the indicator reached an unprecedented peak of over $18 billion, with the cryptocurrency’s value also setting a new record. However, past experience shows that high Open Interest figures can indicate an overheated market. Consequently, the asset was in a precarious position at these all-time high levels.
After the heated market, the coin’s value experienced a considerable decrease, and open interest followed suit with a noticeable drop. Ever since then, both Bitcoin’s value and open interest have fluctuated in tandem.
The indicator has fluctuated erratically between signaling overheating and cool down phases, and following the latest price decrease, its value dipped below the $14 billion mark.
In simpler terms, when Open Interest is high, there’s a greater chance for asset prices to become unstable. This instability could potentially cause the coin to increase or decrease significantly. However, historically, when Open Interest decreases, so does the price.
When the indicator retreats to lower numbers, it actually contributes to price rising. Recently, Open Interest reached its lowest point since early March in this most recent decline.
After a drop in prices for derivatives linked to cryptocurrencies, the value of these digital currencies has bounced back. If open interest, or the amount of outstanding derivative contracts, does not increase significantly again, there is a good chance that this price rise will continue.
BTC Price
Bitcoin has bounced back from its weekend drop, with its value currently reaching $66,300 once more.
Read More
- BTC PREDICTION. BTC cryptocurrency
- LUNC PREDICTION. LUNC cryptocurrency
- BCH PREDICTION. BCH cryptocurrency
- MNT PREDICTION. MNT cryptocurrency
- Best Goomba Characters In Mario Games, Ranked
- SOL PREDICTION. SOL cryptocurrency
- USD RUB PREDICTION
- EUR MYR PREDICTION
- ZETA PREDICTION. ZETA cryptocurrency
- Destiny 2 Player Transforms Their Warlock Into Team Fortress 2’s Medic
2024-04-15 18:11