Crypto Exchange: Spike in BTC Open Interest Suggests New Users Expect Price Gains

[Pelican Press 0]

Crypto Exchange: Spike in BTC Open Interest Suggests New Users Expect Price Gains

The open interest in options on the Bitget exchange has almost reached the level of Binance. According to The Block’s data, the two exchanges are the absolute leaders in terms of OI share in the derivatives market. On May 4, Bitget’s OI indicator exceeded $6 billion for outstanding contracts, representing 25% of the total market.

Additionally, over the past two weeks, the total volume of open futures contracts on Bitget has exceeded the market price level of Bitget, indicating traders’ expectations of a Bitcoin price increase in the near future.

The increase in open interest in futures and options trading signals high market liquidity with many participants and may serve as an indicator of increased money inflow, accumulation by BTC whales, and trading activity on the exchange amid expectations of rate cuts. On May 3, the price of Bitcoin settled above the psychological level of $60,000 following the release of the US employment report, which shifted expectations of the Fed’s interest rate cut from November to September.

Rate cut expectations are among the factors that might positively impact traders’ sentiment and Bitcoin’s price in the medium term. Based on the interest rate meeting results, Fed Chairman Powell will focus on the downward trend in inflation rates, the increase in the unemployment rate to 4.5%, and liquidity risks, which will determine whether to cut interest rates. This suggests that the Fed is considering a rate cut, while the market believes that there will only be one rate cut this year, indicating a divergence. Expectations are that the crypto market has room to “anticipate and act more aggressively” on rate cuts.

Simultaneous growth in open interest in Bitcoin futures and a slight positive reversal in Bitcoin’s price indicate the continuation of the uptrend. However, it’s unlikely that this cycle will be prolonged and the Bitcoin price will reach a new ATH in the near month. From the options market perspective, the implied volatility of BTC and has dropped significantly in the past month, especially for options expiring within one month, indicating that traders do not expect a significant increase in volatility. It is likely that BTC will fluctuate in a wide range of $58,000 to $72,000 in the next 1-2 months.

A high open interest rate suggests that there are more traders participating in the market, which can contribute to increased liquidity and price stability for altcoins. This, in turn, attracts new traders who want to take advantage of price movements and maximize their profits during the altcoin season, bringing more liquidity to the exchange. Bitget has seen a 43% spike in the number of open positions in BTC among new users, indicating that new investments come from people who bet on price gains.

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After a moderate decline in total market OI following the record for open interest on Bitcoin futures reached $29.46 billion on April 9, the average BTC OI in Q2 2024 ******** 1.3 times higher than the Q1 metrics.

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