The total outstanding value of Bitcoin (BTC) futures contracts closed 3.5 billion. Despite not being the price indicator alone, many traders assume that the growing open interest upon the uphill price movements will continue the underlying trend in the market.
On January 14th, the market started art $217.5 billion, and currently, the figure hits at more than $238.8 billion. The BTC and other crypto markets made a surprising move as the leading crypto’s capitalization market suddenly increased yesterday.
The said increased market volatility interestingly fascinated other traders, especially as the BTC futures open interest climbed to $3.5 billion high.
While the buying pressure continues to increase, the open interest in BTC futures can possibly result to more upside. Crypto analyst firm Skew noted that the rise in the open interest all over the exchanges that offer BTC derivative products via Twitter feed.
The tweet reads, “Yesterday’s was a most active session this year for bitcoin futures and busiest since 26th of October. $25bln + going through on our radar.”
“Global open Interest ticked up 15% to $3.5nbln.”
The growing open interest in BTC futures contracts is composed of different derivatives trading platforms, including Binance ($136m), OKEx ($809m), CME Group ($204m), Deribit ($187m), Bitmex ($1.106b), FTX ($63m), Bitfinex ($5m), Huobi ($442m), Kraken ($41m), and Bakkt ($10m).
If you are not aware, open interest is the number of open contracts dedicated to the futures market. Once the open interest increase, it suggests that fresh money is about to flow into the market.
In addition, it provides a bigger picture of the amount of money that enters or leaves a market compared to what trade volume does. Many traders claim that any surge in the open interests suggests for continued price trend in the asset.
So, in the case of BTC, the price is going up recently, along with the underlying futures contracts. The leading asset’s price gas spent the end of 2019 and the beginning of 2020 with an upfront trend. On December 7th, BTC traded at above $6,600, while today’s price is above $8,560.
Open interest might not be the only price direction indicator, but most traders use it to figure out how strong the trend is.
As the open interest, volume, and price increase together, the Bitcoin price tends to continue climbing along with strength. When the open interest and volume decline while the price rises can be a clear sign of a weakening rally. Then, a possible trend will change.
Furthermore, as the price experience a downtrend along with open interest and volume rising, a bearish action tends to continue. In the case that open interest, volume, and price decline together, it indicates that the downtrend is then running out of the stream.
In such a situation, the price rally of Bitcoin will likely continue.
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