Is A Spike In Bitcoin Open Interest Forecasting A 2021 Like Bullrun To $69,000?
October 05 2022 - 9:17AM
NEWSBTC
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. 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. 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.
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