According to data from Coinglass, a cryptocurrency derivatives analysis platform, during the period of Bitcoin (BTC) price decline, the nominal open interest (OI) of Bitcoin futures and perpetual futures decreased from $37 billion to $30.2 billion within a month, a decrease of approximately 18%. Bitcoin open interest is a key indicator of market sentiment.
Source:
Coinglass
These data seemingly indicate that long positions expecting price increases or bullish leveraged bets have been closed in the past four weeks. However, this interpretation may only be partially correct, concealing the bullish undercurrents in the market.
Open interest refers to the number of active or outstanding contracts within a specific period. The calculation method for nominal open interest is multiplying the unit quantity of a contract by its current spot market price. Therefore, even if the total contract volume remains stable, changes in asset prices will still affect the nominal open interest, presenting a misleading market activity pattern. And this seems to be the case in the Bitcoin market.
Coinglass data shows that open interest denominated in BTC has remained above 500,000 BTC for the past four weeks. Meanwhile, the funding rate of perpetual contracts on exchanges has remained positive, indicating a bullish betting tendency in the market.
Source:
Coinglass
Stable open interest (denominated in BTC), positive funding rates, and the decrease in nominal open interest indicate that some traders are building new long positions, offsetting the closing of bullish bets by other market participants. Laurent Kssis, a cryptocurrency ETF expert at CEC Capital, believes that this indicates that traders have not hesitated to establish new long positions.
Similar conclusions can also be drawn from the sustained positive price difference (widely known as the basis) between futures prices and spot prices. Noelle Acheson, author of the newsletter “Crypto Is Macro Now,” stated in an interview with CoinDesk:
Activities in the spot and options markets show a preference for upward movement.
According to Griffin Ardern, Head of Options Trading and Research at cryptocurrency financial platform BloFin, during the price decline, cryptocurrency exchange Bitfinex has been a source of bullish pressure. Data shows that leveraged long positions (margin longs) on Bitfinex, which involve using borrowed funds to purchase assets in the spot market, have been steadily increasing since June.
Ardern said:
Source:
Coinglass
Meanwhile, according to trading firm QCP Capital, traders have been buying upward bets in the options market. The company stated in a market update released on Wednesday:
QCP Capital also mentioned two factors that could break the current downward trend. The first is the heavily skewed upward direction of Bitcoin and Ethereum liquidation clusters, which could trigger a short squeeze. Additionally, the approval of the Ethereum spot ETF’s S-1 form may be imminent, which could lead to a rebound in Ethereum.
Data source
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