Is Open Interest data pointing to an imminent Bitcoin sell-off?
Open Interest in Bitcoin Futures is giving crypto analysts cause for concern as it closes in on its all-time high, leading to the possibility of a brutal correction.
Bitcoin enjoyed a record-breaking October, climbing from $47,000 to an all-time high of $69,999 before settling above $60,000 in the last week.
However, a glance at the stats surrounding Open Interest on Bitcoin Futures nearing an unprecedented peak is beginning to raise eyebrows among financial experts.
“This is typically a bearish signal as it means there is more leverage in the system – this increases the chance of a liquidation event where traders are forced to sell and the price cascades lower,” warns Marcus Sotirou, a Sales Trader at UK-based digital asset broker GlobalBlock.
“This difference between now and April (previous OI all-time-high) is that the percentage of Open Interest holding BTC as collateral has decreased from 70% to 45 % approximately.
“If Bitcoin is being used as collateral there will be an increased chance of a mass-liquidation event, as the price drops lower in tandem with long trading positions.”
Aside from Open Interest, he also raises the alarm over the euphoria seen from the recent rise in meme coins – notably Shiba Inu (SHIB) – that could contribute to a leverage flush in the short term, due to the increase in retail traders.
But the market signals aren’t all full of possible gloom. The GlobalBlock trader singles out Ethereum as having the potential to ride out any imminent storm.
“Since Ethereum’s London Hard Fork almost three months ago, more than 700,000 ETH has been burned which equates to around $2.4 billion,” he explained.
“As the ETH has been permanently removed from the circulating supply, this will give Ethereum bulls more confidence on the long-term price appreciation and gives more weight to the argument that ETH is a store of value.”
