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Bitcoin Open Interest Continues To Climb, Another Violent Move Incoming?

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Data shows the Bitcoin open interest has continued to climb recently, a sign that another violent move may be brewing for the asset.

Bitcoin Open Interest Is Steadily Going Up Right Now

In a new post on X, Maartunn, the community manager at CryptoQuant Netherlands, has looked into how the derivative metrics for Bitcoin right now compare against those seen before the recent crash.

There are mainly two indicators of interest here: the open interest and the funding rate. The former measures the total number of BTC positions on the derivative platforms.

When this metric’s value goes up, investors are opening up new market positions. Generally, such a trend leads to higher volatility for the cryptocurrency, as the total leverage in the market also increases with the indicator’s rise.

On the other hand, decreases in the open interest suggest the investors are either closing up their positions or are getting liquidated. Naturally, this could lead to a more stable price for the asset.

Now, here is a chart that shows how the Bitcoin open interest behaved in the leadup to and during the crash from a few days ago:

Looks like the metric had plunged during the crash | Source: Maartunn on X

The chart shows that as the price had declined in the lead-up to the crash, the open interest had increased. When the crash struck, the open interest plunged, as many positions were liquidated. This drawdown in the metric was the sharpest one observed in around 1.5 years.

The heavy liquidations imply that longs had piled up in the market. And indeed, the funding rate, the other metric of relevance here, would confirm this. This indicator tracks the periodic fee traders on derivative exchanges pay each other.

When this metric has a positive value, it means that the long holders are paying the short holders, and hence, the majority of the positions are long ones. As the chart shows, the indicator’s value had been positive during the le

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Author: Hououin Kyouma

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