Open interest has shown a positive upward trend after falling sharply during the 4th of December crash.
Bitcoin Open Interest Shows Strong Upwards Motion
A CryptoQuant posting pointed out that the BTC open Interest has reversed its trend and now shows sharp upward movement.
The “open interest” is an indicator that measures the total amount of futures contracts still open at the end of any trading day on derivatives exchanges. It takes into consideration both long- and short-term positions.
If this indicator is increasing in value, market volatility could be rising. The current price trend may be supported by an increase in open interest. But, if the value of this metric is very high, it could mean that there’s too much leverage on the market. This may lead to a decrease in crypto prices.
However, market volatility can be lower due to a decrease in the open interest value. An indicator that moves sharply down can cause a sudden price change, which can result in a short- or long-term squeeze. However, the reverse could also happen.
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Here’s a chart showing the Bitcoin open-interest trend over the last month.
The indicator seems to have moved up in recent weeks | Source: CryptoQuant
You can see that Bitcoin’s open interest dropped dramatically during the fourth December crash.
Soon after the recovery, however, the curve began to flatten. Recently, however, the metric showed a strong uptrend and has been climbing.
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This could indicate that the whales may be returning to Bitcoin derivatives markets, which is bullish for crypto’s price.
BTC price
At the time of writing, Bitcoin’s price floats around $48.8k, up 3% in the last seven days. The coin’s value has fallen 18% over the last 30 days.
Below is a chart showing the change in BTC’s price over the past five days.
Source: BTCUSD at TradingView| Source: BTCUSD on TradingView
Bitcoin’s price has remained between $45k-$50k for a long time now. This has meant that it has only shown sideways movements. Today, however, Bitcoin seems to be in an uptrend.
But since the price is still below $50k, it’s unclear at the moment whether this change of trend can help BTC break out of this consolidation. The signs are bullish if the open interest is any indication.
Unsplash.com featured image, Charts from TradingView.com and CryptoQuant.com charts