Skip to main content

Elevated Bitcoin Open Interest Levels Puts Market In Vulnerable Position

Bitcoin has recovered above $23,000 multiple times now, but the digital asset remains in a perilous position. This is because the recovery alone has not been able to assure that the bull trend would endure. Rather, it has been falling the brief buying and selling pressures that have been plaguing investors in recent times. The bitcoin open interest also mirrors this fact and shows just how easy it would be for bitcoin to lose its position.

Bitcoin Open Interest Stays Elevated

For the past week, the bitcoin open interest has been on the rise. After hitting above 300k the previous week, there was no stopping this part of the market. However, it also pointed to more peculiarities about the current bitcoin uptrend.

Related Reading | Why Cardano (ADA) May Breakout In A Bull Run To $1

For one, the elevated bitcoin-denominated open interest shows that there is very high leverage in the crypto market. As with any market, having such high leverage always puts the value of the digital asset in a perilous position. It could swing either way resulting in a short squeeze or a long squeeze. Whatever the case may end up being, the results are often the same; there are significant price swings that would go in either direction.

BTC recovers above $23,000 | Source: BTCUSD on TradingView.com

With the current movement of bitcoin, it is more likely that a long squeeze would be the end of it. This would likely see the price drop back down and touch $20,000. But if the off chance that it does end in a short squeeze, then bitcoin’s price could very well revisit $25,000.

Funding Rates Fall

Last week, the market had seen some much-needed bullish sentiment on the part of perpetual traders when the funding rates had recovered to neutral levels. Given that the funding rates had spent weeks swinging below neutral, this was a welcome change, however briefly.

It would seem the positive recovery would only last a single week as bitcoin funding rates have begun to swing back into the negative. It shows a straight decline down from neutral, indicating that traders were returning to more careful trades.

Funding rates fall below neutral | Source: Arcane Research

Interestingly, though, is the fact that despite the decline in the funding rates, they still continue to maintain higher lows. It shows better prospects compared to the month of June, which was characterized by funding rates remaining perpetually below neutral.

Related Reading | Bullish Sentiment Spills Over To Institutional Investors As Ethereum Inflows Balloons

What this shows is that although bitcoin traders are being more careful, they have not entirely written off the digital asset. This improvement in market sentiment has shone through in bitcoin’s recent recovery. However, for this to continue, funding rates would need a reversal from here.

Featured image from GoBankingRates, charts from Arcane Research and TradingView.com

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet…



from NewsBTC https://ift.tt/PAxuvXI
via IFTTT
Labels:

Comments

Post a Comment

Any questions, Please.

Popular posts from this blog

TA: Ethereum Remains Strong, Why ETH Could Rally Above $2.3K

Ethereum is trading in a positive zone above the $2,150 support zone the 100 hourly SMA against the US Dollar. ETH price is likely to rally if there is a clear break above $2,300. Ethereum is trading in a positive zone above the $2,100 and $2,150 support levels. The price is now trading above $2,100 and the 100 hourly simple moving average. There is a key bullish trend line forming with support near $2,140 on the hourly chart of ETH/USD (data feed via Kraken). The pair start a fresh rally above $2,300 as long as it is above the $2,000 support zone. Ethereum Price Is Showing Positive Signs After forming a base above $2,000, ethereum started a steady increase . ETH broke the $2,200 resistance zone and it settled nicely above the 100 hourly simple moving average. The price even spiked above the $2,250 resistance level. However, the price seems to be struggling to gain pace above $2,250, similar to bitcoin . A high is formed near $2,285 and ether is now correcting lower. There was...
Post a Comment
Read more

DeFi isn’t dead, it just needs to fix these 3 critical problems

It’s been a rough year for DeFi, and it may not get any better until projects focus more on security, regulation and usability. The persistent challenges  decentralized finance  face have been well documented by a handful of analysts and the recent collapse of the Terra ecosystem re-enforced the fact that something is critically wrong with DeFi. I think DeFi today is completely broken for 99% of the population. The promise of a more transparent financial system has been overtaken by greed. UST/LUNA is just the latest in a string of bad developments: — Peter Yang (@petergyang) May 11, 2022 Let's take a look at what experts say DeFi needs to do in order to have another revival.  Improved usability To date, the promise of open and uncensored access to a global decentralized financial system has been largely hampered by the complicated interface, confusing multi-step staking processes and lack of clarity surrounding the yields on various tokens. What do you thi...
Post a Comment
Read more

ENS DAO delegates offer perspective on DAO governance and decentralized identity

AlphaWallet CEO and Spruce co-founder talk about their roles as contributors to the Ethereum Name Service following the project's recent airdrop. Earlier this month, the Ethereum Name Service, or ENS, formed a decentralized autonomous organization, or DAO, for the ENS community.  Cointelegraph spoke to two ENS DAO delegates who applied for the opportunity to represent the community and stay involved in the decision making process: Victor Zhang, CEO of AlphaWallet, an open source Ethereum wallet, and Gregory Rocco, co-founder of Spruce, a decentralized ID and data toolkit for developers. Zhang spoke about his experience as an external contributor to ENS and an early supporter since 2018. Zhang initially sought to help ENS by offering Alpha Wallet as a user-friendly tool for  resolving .eth names and cryptocurrency wallet addresses. Essentially, if a user inputs an .eth name in the AlphaWallet, it will show the wallet address, and vice versa using reverse resolution. Alpha...
Post a Comment
Read more