Bitcoin’s open interest is rose Above 11 billion dollars for the first time in more than two years. This uptick comes as the world’s most valuable coins are rising, recently falling past $51,000, the highest level since December 2021.
Rising open interest and order book imbalance
According to Kaiko, a leading crypto analytics provider, this uptick in open interest comes at a crucial time for the coin. When prices went past $48,000 on February 11, there was an order book imbalance. Then Kaiko noticed that the offer was a hundred million dollars more than asked.
Technically, this indicates that when there is an order book imbalance and there are more bids than requested, buyers are more willing and eager to buy at spot prices than sellers are willing to liquidate. As a result of this imbalance, prices shot higher the following days, as of writing on February 14, it broke above the psychological number of $50,000 to over $51,500.
The rising open interest, especially as market trends are higher, is bullish. It means that more people are willing to participate in the market, hoping to follow the trend. Then, their participation translates into a more liquid market, fueling upward momentum.
Bitcoin is racing higher thanks to strong inflows into Bitcoin Exchange Traded Funds (ETFs). In recent weeks, spot Bitcoin ETF issuers have been rapidly accumulating the coin. The largest yet is BlackRock’s IBIT, which holds over 70,000 BTC.
As a result, prices rise, reflecting high demand directly linked to institutional participation. This positive sentiment and expectations of even more price gains, translating into higher open interest, are despite the ongoing liquidation of the Grayscale Bitcoin Trust (GBTC). After court approval, GBTC will be converted into an ETF, much like others like Fidelity, which also offer a similar product.
Genesis wants to sell GBTC; Will Bitcoin Rise in March?
Even with the high optimism, there is a potential cloud hanging over the Bitcoin market. Genesis, a cryptocurrency lender under bankruptcy protection, wants the court to allow them to sell more than $1.4 billion worth of GBTC.
If the court greenlights this move, BTC could exert more liquidation pressure, potentially wiping out recent gains. So far, the FTX estate has sold its GBTC, which is estimated to be worth well over $1 billion, coinciding with Bitcoin’s decline to a low of $39,500 in January.
In addition to these Bitcoin-specific events, the market is keeping a close eye on how monetary policy in the United States will evolve in the coming weeks. The US Federal Reserve is expected to cut interest rates in March, which is a potentially beneficial move for BTC.
Feature image of DALLE, chart from TradingView
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