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Cryptocurrency News Articles
Bitcoin (BTC) Price Resurgence Seeks Validation From Open Interest (OI) Surge, Signaling Heightened Market Activity and Institutional Participation
Oct 18, 2024 at 06:05 pm
After plunging to a multi-week low of under $59000, market participants saw Bitcoin regain momentum and climb back to $63000 over the weekend.
Bitcoin price has seen a remarkable recovery over the past week, rising from a multi-week low of under $59,000 to nearly $68,000 at the time of writing. This bullish trend has been accompanied by a surge in open interest, indicating heightened market activity and institutional participation.
After briefly dipping to $67,000 during the midweek, Bitcoin price stabilized above $68,000 by Friday. This price action follows a significant pullback from the $73,000 high reached in March 2024.
Open interest in Bitcoin has surged to unprecedented levels, reaching $20 billion according to data from CryptoQuant. This marks a substantial increase from the previous high of $15 billion observed during Bitcoin’s rally in 2021.
Historically, open interest, which measures the number of open derivative contracts, has shown a strong correlation with price movements, especially during periods of sharp market shifts. The recent surge in open interest suggests a significant influx of liquidity and interest in Bitcoin derivatives.
This heightened activity also indicates that traders are increasingly willing to engage in leveraged positions, a development that could signal bullish sentiment while also introducing increased risk into the market.
In a chart shared by CryptoQuant CEO Ki Young Ju, the relationship between Bitcoin’s price and open interest is evident. During Bitcoin’s rally from late 2020 to mid-2021, when the price surged from $10,000 to nearly $60,000, open interest also rose, reaching around $15 billion.
Conversely, during subsequent market corrections in 2021 and 2022, open interest dropped in tandem with price declines. The current increase in open interest is particularly significant because the price of Bitcoin remains only 8% away from its all-time high of $73,737.94.
Meanwhile, as the chart shows, significant correction often follows during a peak in open interest. The current figure suggests the market may be overheated and due for a substantial retracement.
On the other hand, Bitcoin Futures open interest on CME has reached an all-time high, largely driven by institutional investors building up long positions.
According to Vetle Lunde, head of K33 Research, CME open interest hit a new notional peak of 172,430 BTC on Tuesday. Last week, there was an increase of 19,120 BTC, marking the most notable three-day growth since June 2023.
This substantial build-up of longs by institutions comes as Bitcoin price has risen by over 15% year-to-date from the $58,000 level in January. The price has been largely rangebound since then, with key resistance at $73,000 and support around $54,000.
As reported by The Crypto Basic, Bitcoin open interest on CME hit a record high of 182,000 BTC in March 2024, coinciding with the price reaching its all-time peak.
Disclaimer:info@kdj.com
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