Data shows that the indicators related to the Bitcoin derivatives market have been heating up recently, which could lead to more volatility in the price of BTC.
Bitcoin open interest rate & leverage ratio has increased
As noted by CryptoQuant community analyst Maartunn in a new one mail on X, the Bitcoin Open Interest has registered a sharp increase along with the return of the asset above the $100,000 level. The “Open Interest” here referring to a metric that keeps track of the total number of BTC-related derivatives positions currently open on all centralized exchanges.
Below is the chart shared by the analyst that shows the trend in the percentage change of the Bitcoin Open Interest over the past month:
As shown in the graph, Bitcoin's Open Interest has recently seen a significant change, which means that a large number of positions have appeared on the market. In the chart, Maartunn has highlighted the previous examples of the indicator looking at a large percentage increase. It would seem that the price generally saw a cooling when this pattern was formed in the last month.
As for the reason behind this trend, the answer is that more positions usually mean a higher level of leverage in the sector. A chaotic event called a shake it may be more likely to occur in these situations.
During a crisis, a large number of positions are liquidated at the same time and fuel the price movement that caused them. The long price movement then unleashes a cascade of other liquidations.
A squeeze may be more likely to affect the side of the market that has the fastest positions. The previous increases in Open Interest came with increases, so the new positions appeared to be long positions. This is probably why the market ended up seeing a long squeeze to eliminate these extra positions.
It is possible that the latest increase in Open Interest could lead to a similar result for Bitcoin, as these new positions have also joined the rally. It all depends, however, on whether these positions are too high or not.
Unfortunately for the cryptocurrency, this requirement also seems to be fulfilled, as data for the Estimated Leverage Ratio shared by the author of CryptoQuant IT Tech in X mail recommending
The approximate Leverage Ratio tells us, as the name implies, the average amount of leverage that users on the derivatives market choose. Since this metric has also increased along with the increase in open interest, the new positions that have emerged could carry significant leverage.
It remains to be seen how Bitcoin will develop in the coming days, given the potentially overheated conditions that have developed in these derivatives indicators.
BTC price
At the time of writing, Bitcoin is floating around $100,400, up more than 2% over the past seven days.
Source link
