Surge in Bitcoin's Open Interest Sparks Speculation of Sharp Price Reversal
Summary:
Bitcoin's open interest (OI) has surged over $2 billion in three days, possibly indicating an upcoming abrupt "whipsaw" change in its price. BitLab Academy director Kelly Kellam suggests that the rise in OI and ongoing positive funding rates point to the probability of a sharp reversal in Bitcoin's price trend. Currently, Bitcoin is trading at $70,890, marking a 4.23% increase over the past week. However, a sudden 4% drop could liquidate nearly $1.96 billion in long positions, a possible scenario that traders must not overlook, warns crypto trader Jelle.
In just three days, Bitcoin's (BTC) open interest (OI) experienced a significant increase of over $2 billion, causing traders to speculate a possible abrupt change in its price. Notably, pseudonymous crypto trader Daan Crypto Trades observed on June 5 that Bitcoin experienced a substantial increase in Open Interest within the previous 3 days. The term Open Interest refers to the total amount of unsettled derivatives contracts, like options or futures, indicating increased trading speculation.
Kelly Kellam, the director of BitLab Academy, pointed out that this sudden OI spike in Bitcoin, along with the ongoing positive funding rates imply that a drastic directional reversal - "whipsaw" - in Bitcoin's price is highly probable. He further commented that the uptick in open interest coupled with a sustained positive premium indicates a potential minor correction in Bitcoin's health.
According to data provided by CoinGlass, Bitcoin's OI increased by $2.02 billion over the three day period ending June 6, reaching a total of $36.92 billion. It is insightful to remember that Open Interest encompasses the total unsolved derivatives contracts, including options and futures. A high volume of open interest can lead to increased price fluctuations, particularly if traders holding multiple positions suddenly decide to change their strategy. This data can influence traders' overall perception, guiding them as to whether it would be better to maintain or sell-off their cryptocurrency assets.
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At present, Bitcoin is trading at $70,890, an increase of 4.23% over the last seven days, according to data from CoinMarketCap. Over the last 30 days, Bitcoin has seen a rise of 10.42%.
If Bitcoin's prices undergo a sharp 4% downfall to $68,000, nearly $1.96 billion of long positions risk being liquidated. This is a potential outcome that should not be ignored despite the prevailing market sentiment, warns pseudonymous crypto trader Jelle. He further added, “Although I am confident that Bitcoin will soon be exploring new price levels, I strongly suspect that this will not occur without significant volatility.”
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This article does not provide investment guidance or recommendations. Each investment or trading move involves its own risks, and readers should conduct thorough research before making any decisions.
Published At
6/6/2024 8:50:29 AM
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