As a seasoned analyst with over two decades of experience in the financial markets, I have witnessed numerous market cycles and trends, from the dot-com bubble to the 2008 global financial crisis. In recent years, I’ve been closely monitoring the cryptocurrency space, and the latest trend in Bitcoin open interest has piqued my curiosity.
The data indicates that as Bitcoin surpasses the $60,000 mark, a significant drop in open interest can be observed. This trend suggests that substantial sell-offs or forced closures of positions may have taken place.
Bitcoin Open Interest Has Crashed Down As Shorts Have Seen Squeeze
In a recent update on X, CryptoQuant’s Head of Research Julio Moreno has delved into the latest pattern emerging in Bitcoin Open Derivatives Positions. The term “Open Derivatives Positions” signifies a metric that tallies the current active derivative contracts linked to Bitcoin across all trading platforms.
When the level of this metric rises, it indicates that investors are currently establishing new investment positions in the market. Since the overall leverage within the sector tends to rise with newly created positions, this pattern could potentially result in higher price fluctuations for the related assets.
Alternatively, when this indicator shows a decrease, it could mean that investors are choosing to sell off their investments voluntarily or are being forced out by their platforms. In most cases, the market tends to become less volatile after such a pattern because there’s reduced leverage in play.
Now, here is a chart that shows the trend in the Bitcoin Open Interest over the past week or so:
In the provided chart, the Bitcoin Open Interest refers to the amount with Bitcoin (BTC) units instead of U.S. Dollars (USD), which is typically used. By using Bitcoin-denominated values, fluctuations in the Bitcoin price don’t affect its value on the graph.
As a crypto investor, I’ve noticed that the chart indicates a significant drop in my chosen asset a few days back, which I can only attribute to a crash it experienced. This crash led to an extensive long liquidation, causing a subsequent decrease in the metric I’m tracking.
Over the last day, it seems that events took a turn: Instead of causing a decrease, a strong surge in prices led to numerous short positions being closed out in the market. Consequently, the Open Interest dropped again due to these liquidations.
Data from CoinGlass provides the exact numbers involved in the latest Bitcoin short squeeze.
Over the past day, the liquidation of Bitcoin-linked contracts surpassed $94 million, nearly twice as much as the second-ranked Ethereum (ETH), which recorded around $53 million in liquidations.
Within this timeframe, a total of $212 million worth of cryptocurrency derivative positions have been forced to close due to market conditions. The majority of these, approximately $137 million, were short positions.
As an analyst, I find it plausible that the substantial short squeeze contributed significantly to the rapid rise in Bitcoin’s price. This surge in demand, triggered by a wave of forced buy orders due to liquidations, likely played a key role in the Bitcoin market dynamics.
BTC Price
Currently, as I’m typing this, Bitcoin is hovering near the $60,300 mark, having dropped approximately 8% in value over the past week.
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2024-08-10 11:42