This is an opinion editorial by Mike Ermolaev, head of public relations at the ChangeNOW exchange.
As a retail trader or someone who just got started with bitcoin not long ago, you may be searching for clues about what to expect next with its price. A second opinion is also important for seasoned bitcoin investors to compare their own perspectives.
Analyzing Open Interest Of Bitcoin Futures
Bitcoin open interest provides insight into how much money is flowing into and out of the bitcoin derivatives market. Derivatives like bitcoin futures and perpetual swaps are used by traders to speculate on whether bitcoin's price will rise or fall without having to own the digital asset. A higher bitcoin open interest means more traders have opened positions, while a lower one means more traders have closed them.
As of writing, bitcoin-denominated open interest had increased to 592,000 BTC from 350,000 BTC at the start of April 2022. A look at the bitcoin denomination can help isolate periods of increased leverage from price fluctuations.
In USD terms, current open interest is $13.67 billion, which is relatively low, comparable to early bull market levels in January 2021 and June 2021 sell-off lows.
Whenever there is a large increase in open interest on a BTC basis, but not on a USD basis, that signals markets are taking on more BTC exposure, but still don't expect it to move much.
Funding Rates Rise For Perpetual Swaps
In order to understand how most traders are positioned in the market, we can look at funding rates used on perpetual swap contracts: derivative financial contracts unique to bitcoin and cryptocurrency that have no expiration date or settlement. They allow traders to use leverage — up to 100x — when betting on the price of bitcoin. A
