Bitcoin Hits $87,500, But Beware Of 8% Open Interest Spike
Data shows the Bitcoin Open Interest has registered a sharp increase as the cryptocurrency’s price has recovered beyond $87,500.
Bitcoin Open Interest Is Up More Than $2 Billion
As pointed out by CryptoQuant community analyst Maartunn in a new post on X, the Open Interest has shot up for Bitcoin during the past day. The “Open Interest” here refers to an indicator that measures the total amount of BTC-related positions that are currently open on all derivatives exchanges.
When the value of this metric rises, it means the investors are opening up fresh positions on the futures market. Generally, the total leverage in the sector goes up when new positions appear, so this kind of trend can induce volatility in the asset’s price.
On the other hand, the indicator going down implies the holders are either closing up positions of their own volition or being forcibly liquidated by their platform. Whatever the case may be, such a leverage flush can provide more stability to the cryptocurrency.
Now, here is the chart shared by the analyst that shows how the Bitcoin Open Interest has changed over the last 24 hours or so:
The value of the metric appears to have gone through an increase | Source: @JA_Maartun on X
As displayed in the above graph, the Bitcoin Open Interest has witnessed a steep rise in this window. The increase in the indicator has come as the coin’s price has recovered to the $87,500 level.
This isn’t anything too surprising, as exciting price action in the cryptocurrency usually invites speculation. What may be of concern, however, is the scale of the rise that the metric has observed.
As Maartunn has highlighted in the chart, the Open Interest has gone up by more than $2 billion during the past day, which translates to a percentage increase of over 8.3%.
This massive increase is despite the fact that Bitcoin has already seen liquidations amounting to around $76 million in this period, as data from CoinGlass shows.
The heatmap for the liquidations in the cryptocurrency sector | Source: CoinGlass
Leverage-driven rallies like this latest one tend not to last because the underlying conditions present during them are generally unstable. The reason behind this instability lies in the fact that leveraged positions can easily end up being liquidated.
The positions that come during the hype of a rally are often overleveraged, and even if they aren’t, their liquidation point usually lies at an elevated level within the rally. This means that they can be quite vulnerable to any pullbacks that occur.
When these positions find liquidation, they feed back into the price pullback that caused them, thus elongating its length. It’s possible that something similar could end up taking place with this latest Bitcoin rally as well, but it only remains to be seen how things end up going.
BTC Price
The Bitcoin recovery run had gone cold during the past few days, but it appears the last 24 hours have brought back bullish momentum as the coin has managed to rise by over 3%.
Looks like the price of the coin has shot up | Source: BTCUSDT on TradingView
Featured image from Dall-E, CoinGlass.com, coinalyze.net, chart from TradingView.com
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