Bitcoin Open Interest Continues To Rise, Short Squeeze Incoming?
10 Enero 2022 - 1:00PM
NEWSBTC
On-chain data shows Bitcoin open interest and estimated leverage
ratio metrics have continued to rise recently. This could mean that
a short squeeze may be coming soon. Bitcoin Open Interest Rises
Despite Decline In Price As pointed out by an analyst in a
CryptoQuant post, the BTC open interest has shown uptrend over the
past month, despite the price of the crypto moving down. The “open
interest” is an indicator that measures the total amount of Bitcoin
futures contracts that are currently open in the market. When the
value of the metric moves up, it means more investors are opening
long or short contracts on derivative exchanges. This may mean that
leverage is going up in the market, and thus such a trend can lead
to higher volatility in the price of the crypto. On the other hand,
a decline in the metric suggests holders have started to close
their positions. A plunge in the indicator happens when Bitcoin
makes a strong price swing, forcing mass liquidations of the
contracts. Such liquidations cascade together and amplify the price
move. This event is called a long or short squeeze, depending on
which contracts make up the majority. Related Reading
| Bitcoin Fear And Greed Index Has Dipped To Lows Not Seen
Since July Now, here is a chart that shows the trend in the Bitcoin
open interest over the past year: The indicator's value seems to be
trending up | Source: CryptoQuant As you can see in the above
graph, the Bitcoin open interest has been going up, despite the
price moving down. This is different from the trend around the $69k
top as there longs made up the majority and hence the open interest
followed the price. Related Reading | Why Bitcoin Could
Frustrate Bulls And Bears In 2022 The higher percentage of futures
contracts looks to be short holders this time as the indicator has
been moving opposite to the price. BTC Estimated Leverage Ratio
Continues To Reach New Highs Another metric, the “Estimated
leverage ratio,” measures the average amount of leverage that each
futures holder is making use of. This indicator has been making new
highs recently, suggesting that short holders are taking a lot of
leverage risk right now. The below chart shows this trend. Leverage
in the market moves up | Source: CryptoQuant Such a large amount of
leverage has historically lead to a flush sooner or later. And
since this time the derivatives market is dominated by short
holders, a short squeeze event could take place. At the time of
writing, Bitcoin’s price floats around $41.6k, down 12% in the past
week. Below is a chart that shows the trend in the price of BTC
over the last five days. BTC's price has moved sideways in the last
few days | Source: BTCUSD on TradingView Featured image from
Unsplash.com, charts from TradingView.com, CryptoQuant.com
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