In a market that has been relatively quiet for weeks, Bitcoin (BTC) has suddenly come alive, with its Futures Open Interest (OI) reaching levels not seen since the FTX crash. Open Interest, a metric that measures the total number of futures outstanding that have not yet settled, provides a window into an asset’s trading activity and possible future price movements. An increase in OI can indicate increased trading activity and interest in the market.
Early Tuesday, Bitcoin’s price action rose more than 3.5% and broke the $30,300 mark for the second time this month. This move started around 5 AM EST and pushed the price to a 16-day high. The catalyst behind this surge appeared to be rumor that insiders at BlackRock and Invesco have confirmed that a Bitcoin spot ETF is not a question of “if” but “when,” suggesting approval within the next four to six months.
“Bitcoin whales opened huge long positions at $29k,” noted Ki Young Ju, CEO of CryptoQuant. The head of research at CryptoQuant further added, “There has been a lot of talk lately about the increasing likelihood of Bitcoin spot ETF approval in the US. Now the Coinbase bounty is up sharply and moving into positive territory (implied that demand for Bitcoin is strengthening in the US). GBTC price discount has been getting smaller and smaller.”
Bitcoin Futures Open Interest Soars to Yearly Highs
Aggregate OI for Bitcoin futures saw a significant jump, rising more than $1 billion from the previous day to a whopping $14.95 billion, according to data from Coinglass.
This increase marks the largest increase in more than a month. However, derivatives activity on the CME, often viewed as a benchmark for institutional trading, remained relatively unchanged in OI, suggesting that the recent move could be driven primarily by retail.
Miles Deutscher noticed on Twitter: “Bitcoin open interest is now at the highest level since the FTX collapse. This indicates increased BTC trading activity from market participants. It looks like a big step is coming.” Similarly, James V. Straten noted, “Bitcoin open interest is now greater than 2.25% of market cap, approaching YTD highs, and looks exceptionally overheated.”
The Kingfisher, a renowned data provider for Bitcoin derivatives, noted, “Coinbase sales in every other major exchange purchase. Looks like Bybit & Bitmex are betting on another $BTC leg up. While Bitfinex seems to be selling here.”
On the options side, the analysts added that dealers appear bullish, ready to take advantage of both upward and downward movements. Their buying activity is currently stabilizing the price, while a significant upward trajectory could lead them to intensify their buying. Meanwhile, The Kingfisher’s BTC liquidation chart indicates that while there are still “some late high-leverage short positions to liquidate up, most of the near-term liquidity is down.”
Renowned analyst @52kskew provided insight into the BTC whale vs. algo divergence stating, “Whales need quite a lot of liquidity to exit or close positions and usually this is during a squeeze event. Some firms will use algos to get the best price when closing a sizeable position (this is where TWAP algos come in).
CPI release to take the heat off?
Notably, the consumer price index (CPI) in the US is scheduled for release tomorrow, Thursday, 8:30 am EST. The release has the potential to trigger a massive liquidation of the overheated BTC futures market in both directions. A major move by the BTC price seems imminent.
Forecasts point to an increase in overall CPI from 3% to 3.3% YoY for July, marking a major transition as the positive effects of the previous year begin to wear off. In particular, the Cleveland Fed’s Inflation Nowcast model forecasts an aggregate CPI of 3.42%, slightly above general expectations. Core CPI is expected to decline slightly from 4.8% to 4.7% year-on-year.
At the time of writing, BTC price was just below the key USD 30,000 resistance.
Featured image of BTCC, chart from TradingView.com