The recent surge in bitcoin open interest has been fascinating to watch. Surges and troughs appeared and vanished as soon as they appeared, usually matching the price of the digital asset itself. Given the movement, last week was no exception. Bitcoin denominated open interest had plummeted after reaching a fresh all-time high just a few weeks before. This indicates a major shift in investor sentiment following the previous week’s roller coaster.
Bitcoin open interest has dropped by 25,000.
Back in early June, Bitcoinist suggested that a short squeeze could have been the cause of the rally that saw bitcoin rise to around R463K in the final days of May. This was owing to the fact that open interest had skyrocketed to a new all-time high of 307,189 BTC at this point. It was well-received in the market because it returned more investors to profit, but it appears the market is again retracing. Bitcoin denominated open interest has been declining over the last week. As a result, 25,000 BTC were removed from the market in the span of seven days. This resulted in a dramatic drop in open interest as well as a similar change in the price of the digital asset.
The drop reduced total open interest to 292,171 BTC as of Monday’s market closure. Following that, the price of BTC fell below R448. Bitcoin’s value has since recovered, but open interest has lagged.
It’s worth noting that open interest had reached an all-time high moments before the crash on Monday evening. Before the crash, it had surpassed the previous week’s high of 317,734 BTC. Given that the same pattern was observed the previous week, it shows that investor sentiment remains volatile.
Examining the Boards
The FTX crypto exchange saw the most substantial drop in bitcoin denominated open interest. The majority of the reduction had come from here, where open interest had dropped by 15.5 % in just four hours. Other crypto exchanges would then follow but to a lesser extent.
Binance, the top cryptocurrency exchange, saw open interest drop by 10.6 % within the same time period. It was shortly followed by the Bybit cryptocurrency exchange, which saw 9.1 % of its open interest wiped out in four hours.
Surprisingly, Bybit, which had witnessed the smallest decline in open interest, has seen the most impact on its funding rates. Despite the fact that Binance and FTX were larger, Bybit traders experienced a greater degree of capitulation.
Given the interest in bitcoin perpetual, open interest is projected to recover over the following week. However, given recent developments, the likelihood of the digital asset remaining high remains low.