Bitcoin, Ethereum Open Interest Suggests A Squeeze Is Coming

Over the last few weeks, Ethereum and Bitcoin, which are both market leaders in cryptocurrency, saw significant increases in open interest. This is despite the fact that the market has been experiencing declining prices, and investors are taking more cautious positions. These two currencies have seen a dramatic rise in open interest, which could potentially have major implications for crypto markets as a whole.

Ethereum Explodes With Bitcoin 

The Bitcoin open interest is on the rise in the last few weeks. That has resulted in some interesting predictions for the digital asset. Ethereum now follows the same trend. Ethereum’s market cap has increased alongside the open interest in bitcoin over the last week.

This was a record for both digital assets, exceeding June 2022’s levels. Bitcoin rose to 3.21 percent while Ethereum reached an all-time high of 4.244% in the same period. ETH has seen even greater extreme numbers than bitcoin. 

This is a small difference. Since 2019, the ratio between open interest and market capital of ETH and BTC has been around 0.46%. This has changed over the past two years, and the gap continues to widen. 

Bitcoin, Ethereum open interest

BTC/ETH Open Interest Reach New ATH Source: Arcane Research| Source: Arcane Research

This spike was largely due to the Ethereum Merge. As the upgrade was closer, interest in Ethereum had reached its peak. Institutional investors began to invest in Ethereum to fill the gap.

What is Short Squeeze Incoming

An increase in open interest especially if it reaches all-time highs has had huge implications for crypto markets, even though they are only short term. The levels currently indicate that the derivatives for both digital assets and bitcoin are at an all-time high level, which could lead to extremely high leverage.

Bitcoin price chart from

BTC prices settle above $19,000| Source: BTCUSD on

Given such high levels of leverage, it’s important to realize that though it seems more likely for a quick squeeze, it can happen either way. Soon, leverage will start to decrease, which is expected to lead to squeezes. No matter which way the markets swing, they will have devastating consequences.

Market volatility and market instability will rule the day when these events occur. This is the time for investors to reduce their risk to avoid getting caught up in the meltdown. These extreme levels can create disaster by combining bearish trends with high leverage. 

CoinDesk's featured image and charts by Arcane Research and are the sources of this feature.

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