The data shows that Bitcoin Open Interest increased by $1.8 billion as the price of the cryptocurrency broke the $27,000 level.
Bitcoin Open Interest Exploded In The Last Day
The “Open Interest” indicator tracks the total amount of Bitcoin futures contracts currently open on all derivative exchange platforms.
If the value of this metric increases, it means that investors are opening new positions in the current market. In general, the cryptocurrency will be more likely to show volatility when it happens, because new contracts usually mean an increase in the overall leverage of the sector (“leverage” naturally the loan amount holders can choose to take against their positions).
On the other hand, the indicator falling means that a net amount of contracts may close or be liquidated. The asset will be calmer after such a trend.
Now, here is a chart from CoinGlass that shows the trend of Bitcoin Open Interest in the year 2023 until now:
Looks like the value of the metric has shot up over the past day | Source: CoinGlass
The graph above shows that Bitcoin Open Interest registered a sharp surge today. The main instigator behind this rush in futures is the surge of the cryptocurrency mark beyond the $27,000 level.
Before this increase, the indicator had a value of $ 11.04 billion, but now it has hit the $ 12.81 billion mark, suggesting an increase of a huge $ 1.77 billion (about 16%).
This rapid increase in Open Interest will naturally lead to the asset becoming more volatile, although it is difficult to say in which direction this volatility may appear.
If this increase comes from shorts jumping in to bet against the asset, a further increase will result in their liquidation, thus increasing the price increase. If, however, the contracts are opened long, then it may end badly for the rally.
The chart shows that the Open Interest had a similar spike back during the Grayscale rally last month, but those that were previously open ended up liquidating, as the price returned to lower levels.
The funding rate, which measures the periodic fee that futures traders pay to each other, can provide clues as to whether the new positions are shorts or longs.
The value of the metric seems to have been green in recent days | Source: CoinGlass
As can be seen in the graph, the funding rate of Bitcoin is positive today, but it has not changed much with the increase in Open Interest, which means that the long and short positions are spread equally with this increase.
It remains to be seen where the cryptocurrency will go in the next few days and whether the Open Interest surge will play any role.
BTC Price
Bitcoin surged to $27,400 earlier in the day but has since recovered to $27,200.
BTC has surged during the past day | Source: BTCUSD on TradingView
Featured image from Dmytro Demidko at Unsplash.com, charts from TradingView.com, CoinGlass.com
