Categories: Bitcoin Latest News

Is A Spike In Bitcoin Open Interest Forecasting A 2021 Like Bullrun To $69,000?

Bitcoin is losing steam on low timeframes as the price is rejected from the $20,000 and seems poised to re-test previous support levels. The cryptocurrency enjoys a short-lived bullish price action, but buyers have been unable to push further. 

At the time of writing, Bitcoin (BTC) trades at $20,000 moving sideways in the last 24 hours and with a 5% profit in the last 7 days. Other cryptocurrencies in the top 10 by market cap record negative performance and steeper losses than BTC’s price except for Dogecoin and XRP.

BTC’s price moving sideways on the daily chart. Source: BTCUSDT Tradingview
Open Interest Follows Bitcoin Price, What Are The Implication?

As NewsBTC reported based on data from Arcane Research, the Bitcoin price bullish momentum has been followed by participants in the derivatives sector. In Late September and early October, as BTC’s price breached resistance at $20,500, the Open Interest (OI) for future contracts trended to the upside.

Quickly, this OI plummeted as the bulls were unable to follow through on their assault. Something similar happened over the past week with OI spiking, led by the price action. The metric is generally perceived as bearish if the price is moving up, as it indicates traders taking leverage long positions to chase the momentum.

Larger players often used the liquidity served by these leverage positions, pushing the price in the opposite direction, as Bitcoin has seen in the last 24 hours. However, a longer-term increase in Open Interest might lead to large rallies.

According to a pseudonym analyst, the Bitcoin price saw a 55% increase in Open Interest before the 2021 bull-run to $69,000. So far, the metric has seen a 45% increase leaving many to wonder if the crypto market will see a similar price explosion to the upside, as seen in the chart below.

The analyst added the following on the chart below and Open Interest:

I’m not saying we’ll get a similar move as per the highlighted area on the chart from 2020. I’m simply showing how an increase in Open Interest does not have to mean a full retrace every time. It’s true that this did happen while we were in this current range.

Source: @DaanCrypto via Twitter
What Could Tip Off A Large Bitcoin Upside Move

The analyst believes that a spike or decrease in Open Interest accompanied by bids/sell orders in the spot sector might provide more clues into potential persistent trends. In 2022, the price of Bitcoin crashed from its previous all-time high, and this downside pressure has been supported by spot selling.

This prevents an aggressive price reversal to materialize. Additional data provided by Arcane Research indicates a spike in Open Interest from late 2021, this increase has been supported by spot selling. Once the latter stops, Bitcoin could be set for a massive upside trend. On this possibility, the analyst wrote:

(…) as long as spot bid (spot selling) stays steady (Very important), then I don’t see an immediate danger for these positions. If price starts trading lower then that’s where you pay attention.

Source: Arcane Research

Bitcoin is losing steam on low timeframes as the price is rejected from the $20,000 and seems poised to re-test previous support levels. The cryptocurrency enjoys a short-lived bullish price action, but buyers have been unable to push further. 

Related Reading: ImmutableX Breaks Out Of Downtrend, Can Price Rally To $1?

At the time of writing, Bitcoin (BTC) trades at $20,000 moving sideways in the last 24 hours and with a 5% profit in the last 7 days. Other cryptocurrencies in the top 10 by market cap record negative performance and steeper losses than BTC’s price except for Dogecoin and XRP.

BTC’s price moving sideways on the daily chart. Source: BTCUSDT Tradingview

As NewsBTC reported based on data from Arcane Research, the Bitcoin price bullish momentum has been followed by participants in the derivatives sector. In Late September and early October, as BTC’s price breached resistance at $20,500, the Open Interest (OI) for future contracts trended to the upside.

Quickly, this OI plummeted as the bulls were unable to follow through on their assault. Something similar happened over the past week with OI spiking, led by the price action. The metric is generally perceived as bearish if the price is moving up, as it indicates traders taking leverage long positions to chase the momentum.

Larger players often used the liquidity served by these leverage positions, pushing the price in the opposite direction, as Bitcoin has seen in the last 24 hours. However, a longer-term increase in Open Interest might lead to large rallies.

According to a pseudonym analyst, the Bitcoin price saw a 55% increase in Open Interest before the 2021 bull-run to $69,000. So far, the metric has seen a 45% increase leaving many to wonder if the crypto market will see a similar price explosion to the upside, as seen in the chart below.

The analyst added the following on the chart below and Open Interest:

I’m not saying we’ll get a similar move as per the highlighted area on the chart from 2020. I’m simply showing how an increase in Open Interest does not have to mean a full retrace every time. It’s true that this did happen while we were in this current range.

Source: @DaanCrypto via Twitter

What Could Tip Off A Large Bitcoin Upside Move

The analyst believes that a spike or decrease in Open Interest accompanied by bids/sell orders in the spot sector might provide more clues into potential persistent trends. In 2022, the price of Bitcoin crashed from its previous all-time high, and this downside pressure has been supported by spot selling.

Related Reading: Polygon Spikes 6.5% In Last 24 Hours As MATIC Investors See Bullish Momentum

This prevents an aggressive price reversal to materialize. Additional data provided by Arcane Research indicates a spike in Open Interest from late 2021, this increase has been supported by spot selling. Once the latter stops, Bitcoin could be set for a massive upside trend. On this possibility, the analyst wrote:

(…) as long as spot bid (spot selling) stays steady (Very important), then I don’t see an immediate danger for these positions. If price starts trading lower then that’s where you pay attention.

Source: Arcane Research

Tags: bitcoinbtcBTCUSDT

NewsBTCRead More

Recent Posts

Bitcoin Funding Rates Surge 20% On Major Exchanges — What’s Happening?

The price of Bitcoin picked up this week from where it left off in the…

7 hours ago

This Analyst Correctly Predicted The Bitcoin Price Jump To $99,000, But His Prediction Is Not Done

A crypto analyst who accurately forecasted the Bitcoin price increase to the $99,000 All-Time High…

10 hours ago

54% Of Bitcoin Supply Inactive Since 2 Years Despite 500% Price Jump

On-chain data shows a majority of the Bitcoin supply hasn’t moved in more than two…

11 hours ago

Cboe’s New Cash-Settled Bitcoin ETF Options: Could This Spark A Move Beyond $100,000?

Cboe, the derivatives exchange for digital assets and securities trading, is set to make a…

15 hours ago

Bitcoin’s MVRV Metric Signals Market Heating Up—Here’s What Investors Should Know

The ongoing Bitcoin bull market has sparked renewed interest in on-chain metrics to fully understand…

20 hours ago

Bitcoin Price Mirrors 2017 Pattern, Is The Top Only 2 Weeks Away After Hitting $100,000?

The Bitcoin price is well on its way to reaching the $100,000 price mark, with…

1 day ago