Following Crash, Bitcoin Open Interest Declines To Sept 2021 Levels
January 24 2022 - 02:00PM
NEWSBTC
Following the crash to $35k, the Bitcoin open interest has declined
to September 2021 levels. This may suggest that the market
volatility will be lesser in the near future. Bitcoin Open Interest
Drops To Similar Levels As In September 2021 As pointed out by an
analyst in a CryptoQuant post, the BTC open interest has decreased
to similar levels as last September following the crash. The “open
interest” is an indicator that measures the total amount of Bitcoin
futures contracts currently open in the derivatives market. The
metric accounts for both long and short positions. When the value
of the indicator increases, it means more money is entering into
the derivatives market as investors open more positions. The
volatility in the price of Bitcoin usually rises in such scenarios
as it implies leverage in the market is going up, and so a
liquidation squeeze may be coming. On the other hand, when the open
interest declines in value, it means holders are closing up their
futures positions. The resulting lower leverage environment usually
leads to lower price volatility. Related Reading | Bitcoin
Diamond Hands: Despite Recent Fear, Coins Aged 12-18 Months Rise To
2-Year High Now, here is chart that shows the trend in the Bitcoin
open interest since the May of last year: The value of the
indicator seems to have gone down recently | Source: CryptoQuant As
you can see in the above graph, the Bitcoin open interest has
declined after the crash in the price of the crypto to $35k.
Similar behavior was also seen during two other instances in the
last six months, where a crash in the BTC price wiped out some open
interest. Related Reading | Market May Be Suffering But
Bitcoin And Ethereum Will Pull Back Stronger, Bloomberg Analyst
During all these instances, it seems long liquidations were at play
to amplify the slide in the crypto’s price. Now, the Bitcoin open
interest is at the same level as September 2021. Ethereum’s open
interest has also dropped significantly since its ATH, and is now
the lowest since last Sept. The below chart highlights this trend.
Looks like the ETH open interest has also observed a reset |
Source: CryptoQuant As the open interest values are now relatively
lower, the quant believes volatility should also be lesser in the
near term. BTC Price At the time of writing, Bitcoin’s price floats
around $33.3k, down 21% in the last seven days. Over the past
month, the crypto has lost 34% in value. Here is a chart that shows
the trend in the price of BTC over the last five days: Looks like
BTC's price has shown sharp downtrend in the last few days |
Source: BTCUSD on TradingView Featured image from Unsplash.com,
charts from TradingView.com, CryptoQuant.com
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