The data shows that Bitcoin Open Interest has seen a sharp rise alongside the asset price recovery rally that has passed.
Bitcoin Open Interest Has Seen a Spike Recently
As noted by CryptoQuant community analyst Maartunn in a new post on X, Bitcoin Open Interest has shot up. “Open Interest” here means an index that keeps track of the total number of BTC-related derivative positions that are currently open on all central exchanges.
If the value of this metric increases, it means that sellers are opening new positions in the market. Since the total value of the ratio in the sector increases when the positions increase, this type of trend can lead to more volatility in the price of the asset.
On the other hand, a downward trend means that derivatives users are closing their positions at will or being forced out by their platforms. Such a trend can lead to calm price action for the cryptocurrency.
Now, here’s a chart showing the trend in the 24 percent change in Bitcoin Open Interest over the last month or so:
Looks like the value of the metric has been quite positive in recent days | Source: @JA_Maartun on X
As seen in the graph above, Bitcoin Open Interest recently registered a sharp positive change, suggesting that investors opened a large number of positions within a short window.
The impetus for this trend may have been the significant price gains that the cryptocurrency has seen over the past few days. Investors find rapid stock movements exciting, so they tend to engage in more speculation than usual whenever they occur.
As mentioned earlier, an increase in Open Interest can lead to BTC being very strong. The reason for this is that mass liquidation events become more likely for available positions in the market. Such events can be violent, with all liquidations reversing the price movements that caused them.
Some growth in Open Interest may not be bad for the asset, but if it occurs within a small window and is large enough, the risk of the price being adversely affected can be really big.
As the analyst pointed out on the chart, the recent jump in Open Interest took its percentage change to the area that usually points to Bitcoin’s crisis in the past month.
Given this pattern, it remains to be seen whether the derivatives market will have to see another cooling before the commodity rally continues.
BTC price
Bitcoin recovered above the $102,000 mark earlier, but the coin seems to have seen a reversal since then, as its price has returned to $100,800.
The price of the coin has observed a sharp increase over the last two days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com