Data shows the Bitcoin Open Interest on exchanges has been heading up while the Funding Rate has turned negative recently.
Bitcoin Open Interest Trend Suggests Speculators Are Back
As pointed out by CryptoQuant community manager Maartunn in a new on X, things appear to be heating up on the derivatives side of the market. There are two indicators of relevance here: Open Interest and Funding Rate.
The first of these, the Open Interest, keeps track of the total amount of derivatives contracts related to Bitcoin, whether short or long positions, that are currently open on all exchanges.
When the value of this metric goes up, it means the investors are opening up fresh positions on the market right now. As new positions generally come with an increase in the overall leverage present in the sector, this kind of trend can lead to higher volatility for the asset.
On the other hand, the indicator’s value observing a decline implies investors either are closing up positions of their own volition or are getting liquidated by their platform. The coin’s price may become more stable following this trend.
Now, here is a chart that shows the trend in the Bitcoin Open Interest over the past few days:
The value of the metric appears to have been heading up recently | Source:
As displayed in the above graph, the Bitcoin Open Interest had taken a plunge earlier as a result of the cryptocurrency’s decline towards the $58,000 level, which had induced the liquidation of a significant amount of long positions.
After observing some sideways movement, the metric has been on its way back up again, suggesting investors have been opening new positions. This speculative activity can naturally lead to more volatility for the asset.
In theory, such volatility can take the asset in either direction, but depending on the composition of the positions present on the derivatives market, one direction may be more probable than the other.
The indicator that sheds light on the structure of the sector is the second metric of interest here: the Funding Rate. This indicator basically keeps track of the amount of periodic fee that traders on the derivatives market are exchanging between each other.
From the chart, it’s visible that the Bitcoin Funding Rate has been negative during this recent Open Interest increase. When the metric has a negative value, it means the short holders are paying a premium to the longs in order to hold onto their positions, so the new positions that have appeared in the sector recently would be short ones.
Because of the short-heavy market, it’s more likely that these investors betting on a bearish outcome get caught up in a mass liquidation event, thus taking Bitcoin is a more bullish direction. It only remains to be seen, though, as to how BTC’s price action would play out in the coming days.
BTC Price
Bitcoin had seen a brief rebound above $61,000 yesterday, but the coin appears to be back down under $60,000 today.
Looks like the price of BTC has gone down over the last few days | Source:
Featured image from Dall-E, Coinalyze.net, chart from TradingView.com
Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.
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Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.
In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.
Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.
Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..
Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.
Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.
As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.
Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.
Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.
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