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BTC Open Interest: What Two-Year High Means For Bitcoin Price

Last Updated February 21, 2024 1:13 PM
James Morales
Last Updated February 21, 2024 1:13 PM

Key Takeaways

  • Open interest in bitcoin futures is currently at its highest level since 2021.
  • That ratio of long to short positions suggests futures traders are expecting the cryptocurrency’s value to decline in the next month.

Open interest in Bitcoin futures on centralized exchanges has surged to levels not seen since November 2021. Every day since Friday, February 15, the combined value of all open BTC futures contracts has stood at over $22 billion, Coinglass data  shows.

When open interest increases it indicates rising interest in Bitcoin derivatives. However, the metric has a more complex relationship with the underlying spot market.

Low Long/Short Ratio Suggests Looming Price Drop

On Tuesday, the ratio  of long to short positions on Binance was 0.8. In other words, more traders are betting on the price of BTC falling than there are who think it will rise in the near term. 

 

Having soared to a recent high of 2.82 amid a frenzy of media interest in Bitcoin ETFs on January 19, the long/short ratio fell below 1 at the beginning of February and has stayed there since, suggesting a strong bearish sentiment among Bitcoin traders.

What’s more, with Open Interest at a two-year high, there is also the risk that a leverage flush could cause a sharp drop in the cryptocurrency’s value. If any unexpected price movement wipes out a large volume of open positions, the subsequent liquidations could create significant sell pressure in the BTC market.

What Will Happen to BTC in March?

Since climbing above $50,000 on February 14, the price of BTC has remained above the crucial symbolic threshold for a full week. But can the crypto maintain its bull streak? Perhaps not. Many derivatives traders are certainly expecting it to decline in the month ahead.

For instance, one Bitcoin whale recently placed $20 million worth of put options set to expire on March 29. 

The multi-million dollar options play will return a profit if Bitcoin closes the period between $44,200 and $49,800, delivering maximum gains at around the $47,000 mark.

In other words, the trader is expecting the price of BTC to decline by at least a few thousand dollars but is covering their back in case it drops even further to below $45,000.

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