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Bitcoin Open Interest Tops 19-Month High: Historical Data Shows What To Expect

The Bitcoin open interest can often be an indication of where the BTC price might be headed next depending on whether or not the metric is rising or falling. This time around, the Bitcoin open interest has risen drastically, hitting 19-month highs in the process. Using historical data, it is possible to extrapolate what this means for the crypto’s price, especially as investors remain very bullish.

Bitcoin Open Interest Surges To $17.04 Billion

In an interesting turn of events, the Bitcoin open interest has been rising quickly across various exchanges. In the last 24 hours alone, this metric rose by a cumulative 7.89% across all exchanges in the space, bringing the total open interest to 454,150 BTC worth a staggering $17.04 billion.

For now, most of the Bitcoin open interest is concentrated across the CME, Binance, and ByBit exchanges. But perhaps what is even more interesting is that these open interest levels represent a 19-month high.

Bitcoin open interest

According to the data presented on the CoinGlass website, the last time that the Bitcoin open interest moved in this fashion and to this high was back in March 2022, before the historical Terra LUNA crash that sent the market into a prolonged bear market stretch.

This means that the last time that the Bitcoin open interest rose this much was during a time when investors were still very much in the throes of bull run euphoria. As such, the historical performance of the BTC price back then in relation to the open interest could serve as a guide to what might happen to the digital asset’s price next.

BTC price chart from Tradingview.com (Bitcoin open interest)

Historical Data Says BTC Price Will Surge

Similar to the current trend, the Bitcoin open interest had surged from around 38,000 BTC to over 44,000 BTC in the space of a month, and the BTC price followed quickly. This trend saw the price rise in March 2022 from $38,700 to over $47,000 before the month was over.

Going by this historical performance and assuming Bitcoin sticks to this trend, the rally may be far from over. The BTC price is also sitting at a similar price point at $37,500 and a similar surge could bring its price toward $45,000 before the month is over.

However, there is also the possibility that the open interest could peak at this level and begin to decline. Once this happens, then in the same fashion as in April 2022, the BTC price could begin to decline as the open interest drops. A similar crash would send the price back down toward $27,000.

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Bitcoin, Ethereum Open Interest Suggests A Squeeze Is Coming

The two largest cryptocurrencies by market cap, Bitcoin and Ethereum, have seen a significant rise in their open interest in the last couple of weeks. This comes even when the market is seeing struggling prices and investors have begun to take more conservative positions in the market. The drastic increase in the open interest across these two cryptocurrencies could have some significant implications for the crypto market as a whole.

Ethereum Spikes With Bitcoin 

Bitcoin open interest has been on the rise over the last couple of weeks, which has led to some interesting forecasts for the digital asset, and now, Ethereum has begun following the same trend. Over the last week, the Ethereum open interest relative to market cap had surged alongside that of bitcoin.

Both digital assets had actually hit new all-time highs in this regard, beating June 2022 levels. Bitcoin had risen to 3.21% while Ethereum had peaked at about 4.24% during the same time period. So ETH is seeing even more extreme figures compared to bitcoin. 

To put this in perspective, the open interest to market cap ratio of ETH compared to BTC since 2019 has always sat at around 0.46%, representing a fairly small margin. However, this had changed in the last two years and the gap is ever-widening. 

BTC and ETH open interest reach new ATH | Source: Arcane Research

The Ethereum Merge had been the main reason behind this spike. Since interest in the second-largest cryptocurrency had peaked as the upgrade drew closer, institutional investors had begun to set up shop in Ethereum, leading to the wide gap that is now being observed.

Short Squeeze Incoming?

A spike in open interest, especially one that hits all-time high levels, has always had massive implications for the crypto market, even if just in the short term. The current levels suggest that derivatives in both digital assets are very high at the moment, leading to extreme leverage levels.

BTC price settles above $19,000 | Source: BTCUSD on TradingView.com

With such high levels, it is important to keep in mind that while a short squeeze is more likely, it could go either way. Eventually, the leverage levels will begin to wind down, which is when the squeezes are expected to happen. Whatever way they swing in the end, the implications will be just as brutal for the market.

Large market volatility and instability will be the order of the day when this happens. For investors, this is a time to take fewer risks to avoid being caught in this meltdown. The established bear trends and such extreme levels of leverage can be a recipe for disaster. 

Featured image from CoinDesk, charts from Arcane Research and TradingView.com

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Bitcoin Open Interest Falls As Price Dips Below $31,000

The bitcoin open interest over the past several weeks has been interesting to witness. Surges and dips appeared and disappeared just as quickly, usually following the price of the digital asset itself. Last week was no different given the movement. The bitcoin denominated open interest had plunged after only hitting a new all-time high the previous weeks. This suggests a sharp turn in the sentiment of investors after the rollercoaster of the last week.

Bitcoin Open Interest Down 25,000

Back at the beginning of June, Bitcoinist reported that a short squeeze may have been the reason behind the rally that saw bitcoin climb about $30,000 in the last days of May. This had been due to the fact that the open interest had risen drastically to a new all-time high of 307,189 BTC at this point. It was well-received in the market due to the fact that more investors were plunged back into profit but it seems the market is now retracing.

Related Reading | U.S. Macro Pressure Responsible For Entire Bitcoin Downtrend

For the past week, the bitcoin denominated open interest had been on the decline. The result of this had been 25,000 BTC wiped off the market in the space of seven days. This saw a sharp crash in the open interest and like always, a similar movement had been recorded in the price of the digital asset.

The decline brought the total open interest as of the close of market on Monday to 292,171 BTC. What followed was a decline in the price of BTC back below $29,000. The value of bitcoin has since returned but open interest had lagged. 

Open interest takes a nosedive | Source: Arcane Research

It is interesting given that the open interest had hit another all-time high on Monday evening just before the crash. It had beaten the previous week’s high to touch 317,734 BTC before the crash. Given that the same trend was recorded the prior week, it suggests investor sentiment remains unstable.

Checking The Boards

The most significant decline in the bitcoin denominated open interest was recorded on the FTX crypto exchange. Most of the drop had originated from here where the exchange had seen open interest fall by 15.5% in just four hours. This would then be followed by other crypto exchanges, although to a lesser degree.

Binance which is the leading cryptocurrency exchange in the space saw open interest fall by 10.6% in the same time period. It was closely followed by the Bybit crypto exchange, which saw 9.1% wiped off its open interest in a total of four hours.

BTC loses momentum ahead of US trading hours | Source: BTCUSD on TradingView.com

Interestedly enough, Bybit which had recorded the lowest drop in open interest had seen the most impact on its funding rates. Despite that of Binance and FTX being larger, it was Bybit traders who saw a capitulation event to a worse degree.

Related Reading | Bitcoin Miner Revenues Stay Low As Price Decline Continues

Open interest is expected to recover through the next week given the interest in bitcoin perpetuals. However, the probability of the digital asset holding high remains low given recent trends.

Featured image from SciTechDaily, charts from Arcane Research and TradingView.com

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