Tag: bitcoin open interest

Bitcoin Bullish Surge Ahead: Deribit Predicts Major Price Leap In Early 2024

A recent analysis by Deribit, a leading derivatives exchange, suggests a bullish sentiment for Bitcoin as we approach early 2024. This optimism is rooted in the current Bitcoin put-call options ratio, a critical option market metric.

Deribit’s Insight: Bitcoin Calls Outpace Puts Signaling Market Confidence

Notably, options are financial instruments that give traders the right, but not the obligation, to buy (call options) or sell (put options) an underlying asset at a specified price within a set time frame. The put-call ratio is used in options trading to measure market sentiment.

A put option signifies a bet on the price of an asset falling, while a call option represents a wager on its rise. A lower put-call ratio indicates that more traders are betting on the asset’s price increasing rather than decreasing.

Deribit’s analysis shows an increasing trend in the number of call options outstripping put options in Bitcoin’s options market. Luuk Strijers, Chief Commercial Officer at Deribit, highlighted that the put-call ratio for Bitcoin has consistently hovered “between 0.4 and 0.5” throughout the year.

This trend is particularly noticeable for options expiring in March and June 2024, suggesting that investors are increasingly using call options to position for a potential appreciation in Bitcoin’s value during this period.

The put-call options ratio falling below one is a bullish market indicator, as it shows that call volume, or bets on the price increase, surpasses the put volume, which are bets on the price decrease. According to Deribt, Bitcoin’s put-call ratio currently stands at 0.42, as of today.

A Surge In Crypto Derivatives Activity

Meanwhile, November has seen significant activity in the crypto derivatives market, as noted by Strijers. The Deribit executive attributes this increased market activity to higher levels of “implied volatility (DVOL),” which have spurred “opportunities and overall market volumes.”

Bitcoin open interest by expiration. | Source: Deribit

The expiration dates of the upcoming options, especially the significant one on December 29, are expected to maintain the heightened interest and activity in the market. With $5.7 billion in Bitcoin options and $2.7 billion in Ethereum options set to expire at the end of December, the market is poised for notable movements.

Bitcoin open interest based on the previous day. | Source: Deribit

Bitcoin maintains its upward momentum, advancing by 1.8% over the past 24 hours. With Bitcoin currently trading at $38,344, the asset has sustained the gains achieved at the close of the previous month.

Bitcoin’s trading volume significantly reflects heightened market activity, suggesting ongoing buying pressure. In just the last day, trading volumes have surged from around $11 billion earlier in the week to over $21 billion, a noteworthy indication of increasing investor engagement.

Bitcoin (BTC) price is moving sideways on the 4-hour chart. Source: BTC/USDT on TradingView.com

Featured image from Unsplash, Chart from TradingView

Samuel Edyme

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December 1, 2023
Bitcoin Open Interest Tops 19-Month High: Historical Data Shows What To Expect
The Bitcoin open interest can often be an indication of where the BTC price might be headed next depending on whether or not the metric is rising or falling. This time around, the Bitcoin open interest has risen drastically, hitting 19-month highs in the process. Using historical data, it is possible to extrapolate what this means for the crypto’s price, especially as investors remain very bullish.

Bitcoin Open Interest Surges To $17.04 Billion

In an interesting turn of events, the Bitcoin open interest has been rising quickly across various exchanges. In the last 24 hours alone, this metric rose by a cumulative 7.89% across all exchanges in the space, bringing the total open interest to 454,150 BTC worth a staggering $17.04 billion.

For now, most of the Bitcoin open interest is concentrated across the CME, Binance, and ByBit exchanges. But perhaps what is even more interesting is that these open interest levels represent a 19-month high.
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Source: CoinGlass
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According to the data presented on the CoinGlass website, the last time that the Bitcoin open interest moved in this fashion and to this high was back in March 2022, before the historical Terra LUNA crash that sent the market into a prolonged bear market stretch.

This means that the last time that the Bitcoin open interest rose this much was during a time when investors were still very much in the throes of bull run euphoria. As such, the historical performance of the BTC price back then in relation to the open interest could serve as a guide to what might happen to the digital asset’s price next.
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BTC price finds support at $37,400 | Source: BTCUSD on Tradingview.com
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Historical Data Says BTC Price Will Surge

Similar to the current trend, the Bitcoin open interest had surged from around 38,000 BTC to over 44,000 BTC in the space of a month, and the BTC price followed quickly. This trend saw the price rise in March 2022 from $38,700 to over $47,000 before the month was over.

Going by this historical performance and assuming Bitcoin sticks to this trend, the rally may be far from over. The BTC price is also sitting at a similar price point at $37,500 and a similar surge could bring its price toward $45,000 before the month is over.

However, there is also the possibility that the open interest could peak at this level and begin to decline. Once this happens, then in the same fashion as in April 2022, the BTC price could begin to decline as the open interest drops. A similar crash would send the price back down toward $27,000.
Best Owie

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November 16, 2023
Bitcoin Open Interest Is Overheating, Brace For Volatility?
Data shows the Bitcoin futures open interest has risen recently and has reached a territory that has led to volatility for the asset in the past.

Bitcoin Futures Market May Be Becoming Overheated

As explained by an analyst in a CryptoQuant Quicktake post, the BTC open interest has entered the overheat zone following the latest rally in the cryptocurrency’s price.

The “open interest” here refers to the total amount of Bitcoin futures contracts open on all derivative exchanges in the sector. The metric naturally accounts for both short and long positions.

When the value of this indicator rises, it means that the investors are opening up more positions on the futures market right now. Generally, whenever this happens, the overall leverage in the market also goes up, and with leverage, chaos can follow.

Thus, whenever the open interest is at a high enough value, the cryptocurrency price may become more likely to show a high amount of volatility/fluctuations.

On the other hand, decreasing values of the metric imply a closure of positions in the sector (whether by the users’ own volition or through liquidation), which can naturally result in lesser leverage. As such, the asset may become calm when the indicator is at low values.

Now, here is a chart that shows the trend in the Bitcoin open interest over the past year:
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The value of the metric seems to have been going up in recent days | Source: CryptoQuant
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As displayed in the above graph, the Bitcoin open interest has been heading up in the last few weeks, suggesting that investors have been opening more positions on the futures market.

In the chart, the quant has highlighted in yellow a territory where the open interest may be considered overheated. The indicator was in this zone in the lead-up to the FTX crash in November 2022, and it was also there between June and August.

In the first case, the market initially saw a short squeeze (that is, a mass amount of short liquidations) as the price saw some uplift, and then later, a long squeeze took place as the asset crashed, cooling down the open interest.

Bitcoin only saw a long squeeze in the second instance, as the cryptocurrency crashed in August. The indicator retraced to relatively low levels with this liquidation event.

From the graph, it’s apparent that the Bitcoin open interest has once again reached this yellow zone that proved to be a predictor for volatility in these last two occurrences.

In theory, the volatility due to the overheated futures market could take the asset in either direction. Still, given that only long squeezes could cool the market down the last two times the open interest ventured into this zone, BTC may once again see a similar outcome.

“Although I don’t expect anything to happen immediately, we need to keep an eye on it from now on,” notes the analyst. “Indeed, we should be cautious and not over-bet on our investments now that we have entered the overheating zone.”

BTC Price

Bitcoin has continued to move in an overall sideways trajectory during the past few weeks as the asset is still floating around the $34,400 level.
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Looks like BTC hasn't moved much recently | Source: BTCUSD on TradingView
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Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com
Keshav Verma

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October 31, 2023