Open Interest Levels Have (Partially) Hit the Reset Button!

Total open interest on exchanges for #Bitcoin, #Ethereum, and #Solana have declined significantly after the $BTC #AllTimeHigh earlier today. Many other assets not pictured show similar drops. Open interest is the amount of unsettled derivative contracts, mainly futures and options. Today, we saw:

  • $BTC Open Interest drop $1.46B (-12%)
  • $ETH Open Interest drop $967M (-15%)
  • $SOL Open Interest drop $424M (-20%)

    When today's exchange open interest dropped for #Bitcoin, especially, this represented the flushing of many over-speculative trades who were primarily:
  • Longing in anticipation of the $BTC #ATH, resulting in many closing their positions before prices retraced
  • Longing in anticipation of $70K $BTC, resulting in many getting liquidated after prices retraced
  • Shorting in anticipation of the $BTC #ATH not hitting yet, resulting in many shorts getting liquidated on the way to today's short-lived new all-time high

    In a way, we can view this open interest plummet as a sign that 'speculative excess' has been temporarily removed from the markets. Assuming funding rates can even out, prices can theoretically fluctuate under less influence of futures and options positions, and more on a true supply and demand market valuation from traders, investors, and #hodlers.

    Though the trend of a high long vs. short ratio is still persisting after markets retraced today, dropped open interest levels can often precede funding rate levels evening out, which would assist in #cryptocurrency assets everywhere having a quick rebound.

    A continued decline is historically beneficial. Explore the link to our Open Interest chart, and track this trend closely.

Thanks for reading!

If you enjoyed this insight please leave a like, join discussion in the comments and share it with your friends!


Conversations (0)

No comments yet
Be the first to comment