Data shows that the Bitcoin Open Interest recently saw a surge to a new all-time high (ATH), a sign that volatility could emerge for BTC.
Bitcoin Open Interest has been rising lately
As noted by CryptoQuant founder and CEO Ki Young Ju in a new after on X, the Bitcoin Open Interest just set a new record. The “Open interest” here refers to an indicator that tracks the total number of BTC-related derivatives positions open on all centralized exchanges.
Below is the chart shared by Young Ju showing the trend in this statistic over the past few years:
The value of the metric appears to have been heading up in recent days | Source: @ki_young_ju on X
As visible in the chart, the Bitcoin Open Interest has been rising lately, indicating that the investors have opened new positions in the market. After the last continuation of the increase, the indicator has reached a value of $20 billion, which is a new record. As for what this high could mean for the cryptocurrency’s price, a high Open Interest is generally followed by a sharp one inconstancy in possession.
On paper, this volatility can send the coin in either direction, but the chart shows that spikes in the indicator have actually usually led to tops for the cryptocurrency.
The source of the volatility is typically massive liquidation events, which are likely to occur when the market has a large number of highly leveraged positions.
In another X afterthe CEO of CryptoQuant shared the data for Bitcoin Estimated leverage ratiowhich basically tells us about 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 interest to the total foreign exchange reserve of the underlying asset. In the current case, Young Ju posted the version of the indicator that tracks the positions that have Tether’s stablecoin, USDT, as collateral.
While this certainly doesn’t cover the entire market, this version of the metric can still give us an idea of the general trend being followed by traders as a whole.
As shown in the chart above, the Bitcoin Estimated Leverage Ratio for the USDT pair has soared recently, implying 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 new positions emerging could be long positions, the traders betting on a bullish outcome could once again be the ones caught up in the volatility.
BTC price
Bitcoin had crossed the $68,000 level yesterday, but it appears that the value has seen a pullback since then as it has now fallen 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