• Bitcoin open interest has decreased by roughly 300,000 BTC since October 2022.
• The OI has dropped by 15% in the past two weeks with now similar levels to early 2022.
• For this trend to continue Bitcoin must accumulate while the OI declines.
Bitcoin Open Interest Drops Significantly
The total amount of funds allocated in open futures contracts, or Open Interest (OI), has been decreasing significantly over the last few weeks. Back in October 2022, there was a peak of 667,000 BTC allocated in OI contracts, but now that number has dropped to 368,000 BTC – a decrease of about 300,000 Bitcoin. This is equivalent to a drop of almost 15% over the past two weeks and brings OI back down to similar levels as early 2022.
Price Increase While Leverage Unwound
Interestingly enough, during this same time frame Bitcoin’s price jumped from $19,000 to an all-time high of $26,000 – despite the unwinding of leverage which normally indicates bearishness and can cause prices to drop significantly. This is extremely healthy for the market and shows that spot Bitcoin accumulation is taking place while leverage unwinds at the same time – something that needs to happen if this trend is set continue.
What Is Open Interest?
Open Interest (OI) is defined as „the total amount of funds (USD Value) allocated in open futures contracts“. It allows traders to gauge how much money is being put into futures markets and can act as an indicator for long-term market sentiment. A large increase in OI could indicate more bullishness whereas a significant decrease may signify bearishness setting in for the short-term.
Why Are Declining Futures Open Interest Important?
Futures markets are extremely important for gauging overall sentiment because they allow traders to go both long and short on cryptocurrencies without actually having possession of them – allowing them to speculate on future prices without necessarily needing crypto holdings themselves. Thus when we see significant decreases in futures OI it usually means that those who had leveraged their positions have closed them out and are no longer speculating on future prices – indicating a more bullish sentiment over spot accumulation instead of leveraged speculation driving up prices artificially.
In conclusion, it seems like we’re currently seeing a healthy trend where spot Bitcoin accumulation is taking precedence over leveraged speculation which should help stabilize prices going forward while also providing some support if any sudden dips occur due to other factors such as regulatory changes or macroeconomic news releases affecting investor confidence negatively