Following Crash, Bitcoin Open Interest Declines To Sept 2021 Levels

The Bitcoin open interest fell to September 2021 levels following the plunge to $35k. It is possible that market volatility may be less in the future.

Bitcoin Open Interest Drops To Similar Levels As In September 2021

An analyst noted in CryptoQuant that BTC open interest is at the same level as September last year after the crash.

The “open interest” is an indicator that measures the total amount of Bitcoin futures contracts currently open in the derivatives market. This metric includes both short and long positions.

If the indicator is more valuable, that means there are more investors opening positions in the derivatives market.

In such situations, the volatility of Bitcoin’s price usually increases. This is because it indicates that leverage in the market has gone up and therefore a liquidity squeeze might be coming.

However, if the open interest falls in value it is a sign that holders have closed their futures positions. Lower price volatility is usually a result of lower leverage.

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Here’s a chart showing the Bitcoin open-interest trend since May last year.

Bitcoin Open Interest

 Source: CryptoQuant| Source: CryptoQuant

You can see that Bitcoin open interests have declined to 35k since the collapse in crypto’s price.

Similar behavior also occurred in two other cases in the last six-months, when a crash of the BTC prices wiped out some open interests.

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During all these instances, it seems long liquidations were at play to amplify the slide in the crypto’s price. The Bitcoin open interest has remained at the same level since September 2021.

Ethereum’s open interest has also dropped significantly since its ATH, and is now the lowest since last Sept. This trend is highlighted in the below chart.

Ethereum Open Interest

 Source: CryptoQuant| Source: CryptoQuant

Since open interest is now lower than it was in the past, quant believe volatility should decrease in the short-term.

BTC Prices

At the time of writing, Bitcoin’s price floats around $33.3k, down 21% in the last seven days. The crypto’s value has dropped 34% over the last month.

This chart shows how Bitcoin has performed over the course of the last five business days.

Bitcoin Price Chart

BTC price shows a steep downtrend over the last few days. Source: BTCUSD on tradingView| Source: BTCUSD on TradingView's featured image. Charts by chart.

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