It has been interesting to watch bitcoin open interest over the past several weeks. It is usually only after the price of a digital asset rises and falls that it appears and disappears. Last week was no different given the movement. The open interest of the bitcoin denomination was plummeting after only hitting a new all-time high in the past weeks. This indicates a sharp turn in investor sentiment after last week’s volatility.
bitcoin open interest down 25,000
In early June, Bitcoinist reported that a small squeeze could be behind the rally as bitcoin climbed to around $30,000 in late May. This was due to the fact that open interest reached a new all-time high of 307,189 BTC at this time. It was well received in the market due to the fact that more investors came back in profit but it seems that the market is now retreating.
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For the past week, the open interest of the bitcoin denomination was declining. As a result, 25,000 BTC were wiped out of the market within seven days. This saw a sharp crash in open interest and as usual, a similar movement was recorded in the price of the digital asset.
The decline brought the total open interest at 292,171 BTC as of Monday’s market close. BTC price then declined below $29,000. Since then the value of bitcoin has returned but open interest was lagging.
Open interest takes a nosedive | Source: Arcane Research
Interestingly, open interest hit another all-time high on Monday evening just before the crash. It beat last week’s high to touch 317,734 BTC before the crash. Given that a similar trend was recorded last week, it shows that investor sentiment remains volatile.
The most significant drop in open interest for the bitcoin denomination was recorded on the FTX crypto exchange. Most of the fall came from here, where the exchange saw a 15.5 per cent drop in open interest in just four hours. It will be followed by other crypto exchanges, though to a lesser extent.
Binance which is the leading cryptocurrency exchange in the space saw a drop of 10.6% in open interest over the same time period. Then there was the Bybit crypto exchange, which erased 9.1% of its open interest in a total of four hours.
BTC loses momentum ahead of US trading hours | Source: BTCUSD on TradingView.com
Interestingly, Bybit, which posted the least drop in open interest, saw the biggest impact on its funding rates. Despite Binance and FTX getting bigger, it was Bybit traders who saw the capitulation event to a worse degree.
Related Reading | Bitcoin Miner Revenue Remains Low as Price Continues to Drop
Given the interest in bitcoin perpetual, open interest is expected to recover by next week. However, given the recent trends, the chances of the digital asset going higher remain slim.
Featured image from SciTechDaily, charts from Arcane Research and TradingView.com
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