{"id":202867,"date":"2021-03-15T23:02:33","date_gmt":"2021-03-15T20:02:33","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/bullish-uptrend-intact-as-bitcoin-futures-open-interest-hits-22-5b\/"},"modified":"2021-03-15T23:02:33","modified_gmt":"2021-03-15T20:02:33","slug":"bullish-uptrend-intact-as-bitcoin-futures-open-interest-hits-22-5b","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/bullish-uptrend-intact-as-bitcoin-futures-open-interest-hits-22-5b\/","title":{"rendered":"# Bullish uptrend intact as Bitcoin futures open interest hits $22.5B"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3ccbd85806f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3ccbd85806f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/bullish-uptrend-intact-as-bitcoin-futures-open-interest-hits-22-5b\/#The_move_to_61750_did_not_liquidate_sellers\" >The move to $61,750 did not liquidate sellers<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Bullish uptrend intact as Bitcoin futures open interest hits $22.5B <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>Bitcoin (BTC) price has rallied 22.5% in March, but as the price moved up, some buyers began to use excessive leverage, according to derivatives data. Meanwhile, futures open interest reached a $22.5 billion record-high, causing investors to question how sustainable the current rally is.<\/p>\n<p>Being optimistic, especially during a bullish market, can&#8217;t be deemed worrisome. Still, a yellow flag is raised when buyers use excessive leverage because this could lead to large liquidations during a sell-off.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-03\/879af771-99f3-48e0-b188-e83f6c826d55.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USD 6-hour chart. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>After peaking at $58,300 on Feb. 21, Bitcoin faced a 26% correction over the following week. That move wiped out over $4.5 billion worth of futures contracts, therefore virtually eliminating any excessive buyers&#8217; leverage, which was confirmed by the annualized premium on the 1-month futures contract dropping to 17%.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-03\/3a5c1556-e769-459f-8bcb-df49c79d5e75.png\"><figcaption style=\"text-align: center;\"><em>BTC futures aggregate open interest in USD terms. Source: Bybt.com<\/em><\/figcaption><\/figure>\n<p>On March 13 the open interest on BTC futures reached a record $22.5 billion, representing a 39% monthly increase.<\/p>\n<p>To assess whether the market is overly-optimistic, there are a couple of derivatives metrics to review. One is the futures premium (also known as basis), and it measures the price gap between futures contract prices and the regular spot market.<\/p>\n<p>The 1-month futures should usually trade with a 12% to 24% annualized premium, which should be interpreted as a lending rate. By postponing settlement, sellers demand a higher price, and this creates a price difference.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-03\/8e9f11b7-c197-49cb-9e42-c059ada23d82.png\"><figcaption style=\"text-align: center;\"><em>OKEx BTC 1-month futures premium. Source: Skew<\/em><\/figcaption><\/figure>\n<p>The above chart shows the Bitcoin futures basis peaking at 60%, which is usually unsustainable. A basis rate above 35% signals excessive leverage from buyers and creating the potential for massive liquidations and subsequent market crashes.<\/p>\n<p>Take notice of how this indicator corrected after the BTC price dropped from the $60,000 peak on March 13. A similar movement took place on Feb. 21 as BTC reached a $58,300 all-time high and crashed 22% in less than 48 hours. Meanwhile, the futures basis rate adjusted to a neutral 16% level.<\/p>\n<p>A basis level above 24% is not necessarily a pre-crash alert, but it reflects high leverage usage levels from futures contract buyers. This overconfidence usually poses a greater risk if the market recedes 10% or more from its peak.<\/p>\n<p>It is also worth noting that traders sometimes pump up their leverage during a rally, especially on weekends, but later purchase the underlying asset (spot Bitcoin) to adjust the risk.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_move_to_61750_did_not_liquidate_sellers\"><\/span>The move to $61,750 did not liquidate sellers<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Those betting that Bitcoin price will reach $65,000 and above will be pleased to know that open interest has been increasing throughout the 71% rally since February. This situation indicates short-sellers are likely fully hedged, taking benefit of the futures premium instead of effectively expecting a downside.<\/p>\n<p>Using the strategy described above, professional investors are essentially doing cash and carry trades that consist of buying the underlying asset and simultaneously selling futures contracts. <\/p>\n<p>These arbitrage positions usually do not present liquidation risks. Therefore, the current surge in open interest during a strong rally is a positive indicator.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>autho<\/em><em>r<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/bullish-uptrend-intact-as-bitcoin-futures-open-interest-hits-22-5b\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Bullish uptrend intact as Bitcoin futures open interest hits $22.5B &#8221; Bitcoin (BTC) price has rallied 22.5% in March, but as the price moved up, some buyers began to use excessive leverage, according to derivatives data. Meanwhile, futures open interest reached a $22.5 billion record-high, causing investors to question how sustainable the current rally&#8230;<\/p>\n","protected":false},"author":1,"featured_media":202868,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDMvNWUyMWRhZjEtYTllNi00MDE5LTllMjAtMjgzZDFiMDNjNWU3LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74972,74937,74863,74860,75012,74939,73785],"class_list":["post-202867","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-futures","tag-bitcoin-price","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-derivatives","tag-market-analysis","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/202867","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=202867"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/202867\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/202868"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=202867"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=202867"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=202867"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}