Bitcoin futures open interest (OI) – a measure of participation within the derivatives market – has risen nearly 13% for the reason that start of the yr, which analysts say could reflect higher risk appetite for cryptocurrencies.
The rise follows a robust deleveraging period from October to December, when exposure to Bitcoin derivatives fell together with a broad market correction.
Bitcoin futures OI has fallen 17.5% over the past three months, from 381,000 BTC to 314,000 BTC, following a price correction of about 36% in early October, “reflecting a period of de-risking and unwinding of leveraged positions,” CryptoQuant analyst “Darkfost” said on Monday.
However, a Bitcoin futures OI recovery may very well be underway, Darkfost said. Data from Coinglass shows the corporate rose from an eight-month low of $54 billion on Jan. 1 to over $61 billion on Jan. 19.
It also hit an eight-week high of $66 billion on January 15.
“Currently, open interest is showing signs of gradual recovery, suggesting a slow return of risk appetite,” the analyst said.
“If this trend continues and strengthens, this might provide increasing support for a continuation of the upward momentum, even when the recovery stays relatively modest for now.”
OI refers back to the number or notional value of crypto derivatives contracts which can be still open and yet to be settled, or in other words, a measure of what number of lively bets exist available in the market at a given time.
When it rises, more traders take leveraged positions, indicating increasing confidence and risk appetite. However, a falling OI suggests deleveraging as traders reduce exposure and risk.
Bitcoin derivatives OI chart. Source: Darkfost
Reducing debt can also be good for the markets
The zoom out shows that futures OI continues to be 33% below its all-time high of $92 billion in early October.
This can also be a “de-leverage signal” that always marks significant lows, “effectively resetting the market and making a stronger base for a possible bullish recovery,” the analyst said last week.
Open interest in Bitcoin options exceeds that of futures
Coin Bureau co-founder and CEO Nic Puckrin noted on Sunday that Bitcoin options OI flipped futures OI last week.
Futures are a direct leveraged bet on the value direction of Bitcoin. Traders are required to purchase or sell at a set settlement price and date. If the value moves against them, they might be liquidated.
Options provide the best, fairly than the duty, to purchase or sell at a strike price without forced liquidations, which higher contributes to dampening volatility and overall market stability.
According to Checkonchain data, the overall Bitcoin options OI across all exchanges is $75 billion, while the notional value for futures OI is $61 billion.
“This means big money is constructing positions that influence the value itself through hedging and expiration mechanisms. It's not nearly betting up or down,” Puckrin said.
“There might be fewer liquidation cascades, more sticky levels, and retail leverage might be trapped near key prices. BTC's market will behave less like a casino and more like a structured finance system.”
Options OI is currently highest at a strike price of $100,000, with $2 billion on Deribit, one in every of the most important derivatives exchanges within the industry.
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