After having fallen sharply during the crash of December 4, open interest finally seems to be making a comeback as it acquires a strong uptrend.
Bitcoin’s open interest shows strong upward movement
As one CryptoQuant pointed out Publish, the open interest BTC has reversed its trend and is now showing a clear upward movement.
“Open interest” is an indicator that measures the total amount of futures contracts still open at the end of a trading day on derivative exchanges. The metric takes into account both long and short positions.
When the value of this indicator increases, it may mean that the market volatility is increasing. Growing open interest can also support the current general price trend. However, very high values of the metric can involve too much leverage in the market, which can eventually lead to a correction in the price of the crypto.
On the other hand, a decreasing open interest value can cause market volatility to decrease. When the indicator drops sharply, it may lead to a short or long squeeze due to the sudden price movement (the reverse can also be the case).
Related reading | Bitcoin Whale address containing $ 11 million activates after 9 years of dormancy
Now here’s a chart that shows the Bitcoin open interest trend over the past month:
Looks like the indicator has started moving up recently | Source: CryptoQuant
As you can see in the graph above, during the crash on December 4th, the value of Bitcoin open interest fell sharply.
The indicator showed some recovery soon after, but the curve quickly started to flatten. However, recently the metric has increased and has shown a strong uptrend.
Related reading | A sharp drop in Bitcoin’s reserves could suggest a return to the uptrend
This trend may mean that the whales are now returning to the Bitcoin derivatives market, which may be bullish for the price of crypto.
BTC price
At the time of writing, the price of Bitcoin is floating around $ 48.8,000, up 3% over the past seven days. Over the past thirty days, the coin has lost 18% in value.
The chart below shows the BTC price trend over the past five days.
BTC's price might have started to recover | Source: BTCUSD on TradingView
For quite some time now, Bitcoin has mainly shown sideways movement as the coin is stuck between the price points of $ 45,000 and $ 50,000. However, today BTC appears to have moved towards a strong uptrend.
But as the price is still below $ 50,000, it is not clear at this time whether this trend change can help BTC out of this consolidation. Looking at open interest, the signs appear to be bullish.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
