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Crypto vs. Dollar

📌 Open interest in cryptocurrencies hits record high: explosive growth is just around the corner?

As noted by Maartunn, community manager of CryptoQuant Netherlands, in a post on Site X, total open interest in cryptocurrencies has recently totaled around $51.3 billion. Bitcoin

– As noted by Maartunn, community manager of CryptoQuant Netherlands, in a post on Site X, total open interest in cryptocurrencies has recently totaled around $51.3 billion.

“Open interest” here refers to the sum of derivative positions in all digital assets currently open on the various exchanges in the sector.

See also: Bitcoin’s fall: miners hesitate to expand in anticipation of the rate halving?

If the value of this indicator is rising, it means that investors are opening new positions in the market right now. As a rule, when such a trend is forming, assets are more likely to show volatility as leverage in the sector increases.

On the other hand, if the indicator tends to decrease, it means that investors either voluntarily withdraw from their positions, or they are forced to liquidate them by their counteragents.

A sharp drop in the indicator is accompanied by violent price movements, but as soon as the indicator value is established, the market stabilizes due to leverage washout.

Below is a chart showing the open interest in cryptocurrencies over the past few years:

As you can see from the above chart, open interest in the cryptocurrency sector as a whole has been on the rise recently. This increase comes on the back of rising bitcoin and other asset prices.

This is not unusual, as such price movements attract a lot of attention. Increased attention, naturally, generates speculation, so at such times there is a rush of users taking positions on exchanges.

The chart shows that open interest in the cryptocurrency market also increased in the bullish 2021. However, the latest value of the index has already exceeded the peak value at that time.

The latest value of the indicator is around $51.3 billion, which is an all-time high. As mentioned above, the high value of the ratio can lead to volatility in various assets in the sector.

See also: Bitcoin/stablecoin ratio at a yearly low: bullish?

The current extreme level of open interest could mean that the market is prone to sharp price fluctuations in the near future. Such volatility could take the market in either direction, at least on paper.

However, as you can see from the chart, historically the indicator has only shown a significant drop when the bitcoin price collapses, so the current overheating of open interest could be a bad sign for the cryptocurrency market.

At the time of writing, bitcoin is up over 9% in the last week and is around $70,100.

Bitcoin

Bitcoin

$61,060.51

BTC -3.14%

Ethereum

Ethereum

$3,000.66

ETH -2.28%

Binance Coin

Binance Coin

$533.58

BNB -0.93%

XRP

XRP

$0.50

XRP 0.00%

Dogecoin

Dogecoin

$0.15

DOGE -3.93%

Cardano

Cardano

$0.45

ADA -1.56%

Solana

Solana

$134.55

SOL 0.31%