Bitcoin’s open interest just hit another record high. What does this mean for the price of BTC? Let’s dive in.
What is Open Interest?
Open interest is a metric that tracks the total number of outstanding Bitcoin derivative contracts across all exchanges. A rising open interest means more traders are placing bets on Bitcoin’s price, leading to potentially higher market leverage and volatility. Conversely, a falling open interest suggests traders are closing positions, potentially leading to more price stability.
The Recent Surge in Open Interest
Recently, Bitcoin’s open interest has skyrocketed. This sharp increase coincides with Bitcoin’s recent price rally. While increased price action naturally attracts more speculation, the sheer scale of this rise is noteworthy.
Historically, extremely high open interest has often preceded a “squeeze”—a mass liquidation event. During a squeeze, a sudden price swing wipes out many overleveraged positions, creating a feedback loop that amplifies the price movement and triggers even more liquidations. While a squeeze could push the price in either direction, in bullish markets like the current one, it often leads to a correction as long positions unwind.
A Temporary Pause, Then Back Up
Over the past few days, the open interest cooled off slightly. However, it’s climbed again, suggesting speculators are back in the game. The coming days will reveal whether another squeeze is on the horizon.
Current Bitcoin Price
At the time of writing, Bitcoin is trading around $90,500, a nearly 10% increase over the past week.
The Bottom Line
The record-high open interest is a significant development. While it doesn’t predict the future price of Bitcoin, it strongly suggests increased volatility is likely in the near term. Keep an eye on this metric for clues about the direction of Bitcoin’s price.
