Data shows that Bitcoin Open Interest has recently seen a surge to a recent all-time high (ATH), which is a sign that volatility may be brewing in BTC.
Interest in Bitcoin Open has been growing recently
As noted by CryptoQuant founder and CEO Ki Newborn Ju in the recent edition post on X Bitcoin Open Interest just set a recent record. “Open Interest” here refers to a metric that tracks the total amount of BTC-related derivatives positions that are open on all centralized exchanges.
Below is a chart provided by Newborn Ju that shows the trend of this indicator over the last few years:
The value of the metric appears to have been heading up in recent days | Source: @ki_young_ju on X
As you can see from the chart, Bitcoin Open Interest has been increasing recently, which suggests that investors are opening recent positions in the market. After the recent continuation of growth, the indicator reached a value of $20 billion, which is a recent record. As for what this high level could mean for the cryptocurrency’s price, high open interest is typically associated with high asset volatility.
On paper, this volatility could swing the coin in either direction, but it’s clear from the chart that the indicator’s highs actually tend to lead to highs for the cryptocurrency.
The source of volatility is usually mass liquidations, which can occur when there are a immense number of highly leveraged positions in the market.
In another X postCryptoQuant CEO shared data on Bitcoin’s estimated leverage ratio, which basically tells us the average amount of leverage users are currently opting for.
Looks like the value of this metric has also been rising recently | Source: @ki_young_ju on X
The estimated leverage ratio is calculated as the ratio of the open position to the total foreign exchange reserve of the underlying asset. In this case, Newborn Ju published a version of the indicator tracking positions backed by Tether’s stablecoin, USDT.
While it certainly does not cover the entire market, this version of the metric can still give us an indication of the overall trend being observed by traders as a whole.
As shown in the chart above, the estimated Bitcoin leverage ratio for the USDT pair has recently increased dramatically, which means that investors have increased their risk appetite.
So with all this leverage, BTC could really be at risk of a volatile explosion. Given that these recent positions that have been emerging may be long positions, bullish investors may once again get caught up in the volatility.
BTC price
Bitcoin broke above $68,000 yesterday, but the asset’s value appears to have dropped since then and is currently down to $67,200.
The price of the coin appears to have been riding an uptrend over the last few days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
