Recent data reveals that the open interest in Bitcoin has dropped significantly as the price of BTC surpasses $60,000, indicating a wave of large liquidations taking place.
Bitcoin Open Interest Plummets Amid Short Squeeze
In a recent update on X, Julio Moreno, the Head of Research at CryptoQuant, delves into the current trend seen in Bitcoin’s open interest. The term “open interest” refers to a metric that tracks the total number of derivative positions related to BTC that are currently active across all exchanges.
When this metric increases, it signifies that investors are opening new positions in the market. This surge in leverage can lead to higher volatility in the asset’s price. Conversely, a decline in the indicator suggests that either existing positions are being closed voluntarily or investors are facing liquidation by their platforms, resulting in reduced leverage and price stability.
Take a look at the chart below depicting the recent trend in Bitcoin’s open interest:
The sharp decline in open interest over the past few days | Source: @jjcmoreno on X
The chart illustrates the Bitcoin open interest in BTC denomination rather than USD, ensuring that its value remains unaffected by fluctuations in the coin’s price. The recent crash in Bitcoin’s price led to a significant amount of long liquidations, causing a drop in the open interest metric.
In the last 24 hours, a sharp rally triggered a surge in short liquidations, resulting in another decline in open interest. Data from CoinGlass provides detailed insights into the recent Bitcoin short squeeze, with liquidations exceeding $94 million within a day.
Summary of recent liquidations in the market | Source: CoinGlass
Bitcoin contracts witnessed liquidations totaling over $94 million, with shorts accounting for a majority of the liquidations. The entire cryptocurrency derivatives sector faced liquidations amounting to $212 million during this period.
Overview of total market liquidations | Source: CoinGlass
Given the magnitude of the short squeeze, it’s probable that the recent sharp rise in Bitcoin’s price was fueled in part by this series of liquidations.
Bitcoin Price
Currently, Bitcoin is hovering around $60,300, marking an 8% decline over the past week.
Recent recovery in the asset's price | Source: BTCUSD on TradingView
Featured image from Dall-E, CoinGlass.com, chart from TradingView.com
