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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Is A Spike In Bitcoin Open Interest Forecasting A 2021 Like Bullrun To $69,000?

Reynaldo Marquez
Reynaldo Marquez
1 year ago
2 mins read
bitcoin

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Bitcoin is losing steam on low timeframes as the price is rejected from the $20,000 and seems poised to re-test previous support levels. The cryptocurrency enjoys a short-lived bullish price action, but buyers have been unable to push further. 

Related Reading: ImmutableX Breaks Out Of Downtrend, Can Price Rally To $1?

At the time of writing, Bitcoin (BTC) trades at $20,000 moving sideways in the last 24 hours and with a 5% profit in the last 7 days. Other cryptocurrencies in the top 10 by market cap record negative performance and steeper losses than BTC’s price except for Dogecoin and XRP.

Bitcoin BTC BTCUSDT
BTC’s price moving sideways on the daily chart. Source: BTCUSDT Tradingview

Open Interest Follows Bitcoin Price, What Are The Implication?

As NewsBTC reported based on data from Arcane Research, the Bitcoin price bullish momentum has been followed by participants in the derivatives sector. In Late September and early October, as BTC’s price breached resistance at $20,500, the Open Interest (OI) for future contracts trended to the upside.

Quickly, this OI plummeted as the bulls were unable to follow through on their assault. Something similar happened over the past week with OI spiking, led by the price action. The metric is generally perceived as bearish if the price is moving up, as it indicates traders taking leverage long positions to chase the momentum.

Larger players often used the liquidity served by these leverage positions, pushing the price in the opposite direction, as Bitcoin has seen in the last 24 hours. However, a longer-term increase in Open Interest might lead to large rallies.

According to a pseudonym analyst, the Bitcoin price saw a 55% increase in Open Interest before the 2021 bull-run to $69,000. So far, the metric has seen a 45% increase leaving many to wonder if the crypto market will see a similar price explosion to the upside, as seen in the chart below.

The analyst added the following on the chart below and Open Interest:

I’m not saying we’ll get a similar move as per the highlighted area on the chart from 2020. I’m simply showing how an increase in Open Interest does not have to mean a full retrace every time. It’s true that this did happen while we were in this current range.

Bitcoin BTC BTCUSDT Chart 2
Source: @DaanCrypto via Twitter

What Could Tip Off A Large Bitcoin Upside Move

The analyst believes that a spike or decrease in Open Interest accompanied by bids/sell orders in the spot sector might provide more clues into potential persistent trends. In 2022, the price of Bitcoin crashed from its previous all-time high, and this downside pressure has been supported by spot selling.

Related Reading: Polygon Spikes 6.5% In Last 24 Hours As MATIC Investors See Bullish Momentum

This prevents an aggressive price reversal to materialize. Additional data provided by Arcane Research indicates a spike in Open Interest from late 2021, this increase has been supported by spot selling. Once the latter stops, Bitcoin could be set for a massive upside trend. On this possibility, the analyst wrote:

(…) as long as spot bid (spot selling) stays steady (Very important), then I don’t see an immediate danger for these positions. If price starts trading lower then that’s where you pay attention.

Bitcoin BTC BTCUSDT Chart 3
Source: Arcane Research
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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

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