Why Bitcoin Futures OI climbing to pre-ATH levels is important
Open interest in Bitcoin Futures is back to above $10.3 billion, a figure the charts last noted well before its most recent ATH. Interestingly, with Bitcoin trading at just over $35,500 at press time, one can also see that institutional demand for Bitcoin hasn’t dropped completely either. In fact, it is around to support Bitcoin at the said valuation – A positive sign for the crypto’s price rally.
Alas, while retail traders are expecting the price to bounce back to its ATH level, the biggest obstacle to the same is the increasing active supply. The investment flows into Grayscale have been lower than what was anticipated, and well below the figures needed for Bitcoin to hit $40,000 again.
In fact, there was a drop of over 22% in the fund inflows against over a 20% drop in Bitcoin’s price over the same period. Ergo, it wouldn’t be an understatement to say that the cryptocurrency lost a lot of momentum over the last two weeks.
However, what happened in 2020 is critical to the current trend in the price rally. What must be noted here is that the price rally in 2021 pushed BTC’s value 250% higher than last year’s high. The world’s largest cryptocurrency’s press time price level, therefore, is better than settling below the $20,000-level.
In addition to the price rally and the 250% gains, the number of whales HODLing 1k or more Bitcoins has gone up by 8% this year. However, this is not the single best metric to predict Bitcoin’s rally to a new ATH.
In fact, there are short-term risks too, with each likely to rear its head if BTC’s price and market momentum continue to drop. Consider this – If Bitcoin does indeed fall to the $20,000-level again, long-term HODLers and traders might be more likely to give in to the selling pressure on the charts.
Further, based on the liquidations chart from Bybt, of late, there have been more long liquidations compared to shorts, a finding indicative of the increasing sell pressure on spot exchanges.
Futures have a big impact on the selling pressure in the market. When discussing Bitcoin Futures, it is critical to consider that the CME’s trade volume has increased significantly, with the same signaling greater institutional interest in Bitcoin Futures.
The number of Open Interest HODLing institutions on CME is over 100 too, with the same noted to be 97 in the last quarter of 2020, according to Investopedia. Finally, over 40% of CME Futures trade volume is from outside the U.S, and it could be attributed to Asia and Europe. Currently, based on OI and CME Futures trade volume, there is a possibility that the price drops below $30,000 in the short-term, despite the likelihood of sudden, short-lived hikes.