Bitcoin has seen a recovery above $99,000 recently, but the trend taking place in the Open Interest could raise concerns about the surge’s longevity.
Bitcoin Open Interest Has Spiked Alongside The Latest Rally
In a new post on X, CryptoQuant community analyst Maartunn talked about the trend in the Bitcoin Open Interest alongside the latest price rally. The “Open Interest” here refers to an indicator that keeps track of the total amount of positions related to BTC that are currently open on all derivatives exchanges.
When the value of this metric rises, it means the derivatives users are opening fresh positions. Generally, the total amount of leverage goes up in the sector as new positions pop up, so this kind of trend can lead to higher volatility for the asset’s price.
On the other hand, the indicator’s value registering a decline implies the holders are either closing up positions of their own volition or getting liquidated by their platform. The cryptocurrency may act in a more stable manner following such a leverage flushout.
Now, here is the chart shared by the analyst, that shows the trend in the Bitcoin Open Interest, as well as its 24-hour percentage change, over the last week:
The value of the metric appears to have shot up during the past day | Source: @JA_Maartun on X
From the above graph, it’s visible that the Bitcoin Open Interest has seen a rapid increase alongside the latest recovery rally in the coin’s price. At the peak, the 24-hour percentage change hit the 7.2% mark, which is quite significant.
While it’s normal for speculative activity to follow a sharp move in the cryptocurrency, an excess of it can still be an alarming sign. This is because in a high-leverage environment, the chances of a mass liquidation event can become notable.
In theory, the volatility emerging out of such derivatives market chaos can take the cryptocurrency in either direction, but usually, Open Interest spikes that accompany rallies end up acting as an impedance for it. Thus, it’s possible that the latest Bitcoin rally may also unwind in a volatile manner.
The trend in the Open Interest isn’t the only one that suggests volatility could be coming for the asset, as the analytics firm Glassnode has pointed out in an X post.
The trend in the BTC Realized Volatility over the past few years | Source: Glassnode on X
The chart shared by the analytics firm is for the 1-week Realized Volatility, an indicator that tracks the percentage change between the highest and lowest points in the Bitcoin price recorded during the last seven days.
As displayed in the graph, the metric’s value has plunged recently, implying the asset has been trading inside a very narrow range. “In the past four years, it has dipped lower only a few times – e.g., Oct 2024 (22.88%) & Nov 2023 (21.35%),” explains Glassnode. “Similar compressions in the past led to major market moves.”
BTC Price
Following a jump of around 2% in the last 24 hours, Bitcoin has recovered back above the $99,300 level.
Looks like the price of the coin has been marching up in recent days | Source: BTCUSDT on TradingView
Featured image from Dall-E, Glassnode.com, CryptoQuant.com, chart from TradingView.com
