Heightened Bitcoin futures open interest shows leverage appetite, but sharp market swings target volatility flush to reset the market.
Bitcoin has seen elevated volatility in the past few days. Specifically, a series of price fluctuations has left leveraged position liquidation high. For context, after Bitcoin surged to a new all-time high of $126,200 on Monday, a sharp 2.64% decline followed, with the token touching $120,600.
By Wednesday, BTC reclaimed $124,000 only to relinquish earlier gains on Thursday, with a drop to an intraday low of $119,700. Glassnode noted in a tweet today that the uncertainty in this market direction was due to Bitcoin undergoing a “leverage reset.”
Price Fluctuation Targeting Excess Positions
While Bitcoin has looked stable today, the market has liquidated over $1.74 billion worth of positions in the past four days. Most positions have been shorts, as the market has clearly been on a downtrend, but longs have also had a fair share of the pie.
Glassnode noted that this sharp move in both directions was to flush out excess volatility for a leverage reset. Nonetheless, Bitcoin open interest remains elevated, with leverage appetite growing intense among market users.
Bitcoin Open Interest Still Elevated
Meanwhile, Glassnode highlighted that Bitcoin futures open interest (OI) remains high. An accompanying chart shows a steady growth in OI since the start of October, as market users position to maximize the “Uptober” momentum.
OI volume started moving from around 370,000 on October 1 to a high of 397,500 by October 7 before a slight reduction. Nonetheless, its elevated nature suggests persistent leveraged pressure despite price uncertainties.
Data from Coinglass further confirms this futures interest. The exchange Bitcoin futures open interest stands at $90.24 billion at the time of writing. While this is down from $94.12 billion on Tuesday, it remains at a high compared to previous market trends.
Notably, growing OI signals support strong market trends, as they provide liquidity for major market moves. Nonetheless, an overleveraged market increases volatility and could spark flush-outs as seen recently.
Bitcoin Finally Ready to Move?
Meanwhile, while momentum remains in the market, widely known pundit Lark Davis suggested that Bitcoin might finally be ready to move. He noted in a parallel tweet that after faking out twice at $120,000, the level has now held as support.
For perspective, Bitcoin experienced severe rejection above $120,000 in July, dropping back to the support around $112,000. A similar fake-out occurred in August’s high of $124,277, with an intense correction following again.
However, Bitcoin has closed and remained above $120,000 since October 2. Prices have also retested the support, with BTC bouncing from there yesterday. As a result, Davis suggested that if the level is sustained and momentum remains bullish, Bitcoin would rally to $130,000 next.
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