After the crash, Bitcoin open interest falls to September 2021 levels
After crashing to $35k, Bitcoin’s open interest has fallen to September 2021 levels. This may indicate that market volatility will be less in the near future.
Bitcoin Open Interest Drops to Similar Levels to September 2021
As noted by an analyst in a CryptoQuant after, BTC’s open rate has fallen to a level similar to last September after the crash.
The “open interest” is an indicator that measures the total number of Bitcoin futures contracts currently open in the derivatives market. The metric takes into account both long and short positions.
When the value of the indicator rises, it means that more money is coming into the derivatives market as investors open more positions.
The volatility in the price of Bitcoin usually rises in such scenarios as it implies that the leverage in the market is increasing, and thus liquidation pressure can come.
On the other hand, when open interest falls in value, it means holders close their futures positions. The resulting lower leverage environment usually leads to lower price volatility.
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Now, here’s a chart showing the trend in Bitcoin’s open interest since May last year:
The value of the indicator seems to have fallen recently | Source: CryptoQuant
As you can see in the chart above, Bitcoin’s open interest has fallen to $35k after the crash in the crypto’s price.
Similar behavior was also seen in two other cases in the past six months, where a crash in the BTC price wiped out some of the outstanding interest.
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During all these instances, it seems that long liquidations were involved to amplify the crypto’s price drop. Now Bitcoin’s open interest is at the same level as September 2021.
Ethereum’s open interest has also fallen significantly since the ATH and is now the lowest since last September. The chart below shows this trend.
Looks like ETH open interest has also seen a reset | Source: CryptoQuant
Since open interest values are now relatively lower, the quantity believes that short-term volatility should also be less.
At the time of writing, Bitcoin’s price is hovering around $33.3k, down 21% over the past seven days. In the past month, the crypto has lost 34% in value.
Here is a chart showing the trend in the price of BTC over the past five days:
It seems that the price of BTC has been on a sharp downward trend in recent days | Source: BTCUSD on Trading Display
Featured image from Unsplash.com, Charts from TradingView.com, CryptoQuant.com