Bitcoin Open Interest Climbs Up, Price To Break Sideways Trend Soon?

Keshav Verma

1 year ago

3 mins read

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On-chain data shows the Bitcoin open interest has been slowly growing recently, something that could lead to more volatility in the price of the crypto.

Bitcoin Open Interest Goes Up While Funding Rates Approach A Neutral Value

As pointed out by an analyst in a CryptoQuant post, the BTC open interest has gained around $500 million over the last few days.

The “open interest” is an indicator that measures the total amount of BTCUSD positions currently open on all derivatives exchanges. The metric takes into account for both short and long positions.

When the value of this indicator goes up, it means investors are opening up more positions on exchanges right now. Since this usually leads to a higher amount of leverage in the market, this kind of trend can make the price of Bitcoin more volatile.

On the other hand, the decline in the metric implies positions are closing up or liquidating on exchanges at the moment. Lower leverage usually leads to a more stable value of the crypto, and so such a trend can result in lesser volatility for BTC.

Now, here is a chart that shows the trend in the Bitcoin open interest over the last few days:

The value of the metric seems to have climbed up in recent days | Source: CryptoQuant

As you can see in the above graph, the Bitcoin open interest has observed an uplift during the past couple of days.

This increase amounted to around $500 million and took the indicator’s value from $8.15 billion to $8.66 billion.

The chart also includes data for the “funding rates,” a metric that tells us about the distribution of BTC positions between longs and shorts.

This indicator has most recently had a slightly negative value, which means the market is slightly leaning towards a short-dominant environment right now.

In times of high open interest (and hence high leverage), the market becomes more prone to seeing largescale liquidation events. Such liquidations are the reason behind the increased volatility of the market during such periods.

BTC has been mostly moving sideways during the last few days, but since the open interest has jumped up now, it’s possible the crypto could see fresh movement soon.

The funding rates can hint at which direction this new price volatility may favor, but since the metric’s value is almost neutral currently, it’s hard to say anything.

At the time of writing, Bitcoin’s price floats around $19.7k, down 1% in the past week.

BTC has continued to consolidate sideways during the past week or so | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

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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