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Bitcoin Open Interest Reaches Dangerously High Values, Leverage Flush Coming?

By Orbit Brain

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Bitcoin Open Interest Reaches Dangerously High Values, Leverage Flush Coming?

Bitcoin Open Interest Reaches Dangerously High Values, Leverage Flush Coming?

On-chain information exhibits Bitcoin open curiosity has reached dangerously excessive values, an indication {that a} leverage flush could also be coming quickly.

Bitcoin Open Curiosity Rises To Excessive Values

As identified by an analyst in a CryptoQuant put up, the BTC open curiosity has now reached values the place mass liquidations have taken place previously.

The “open curiosity” is an indicator that measures the entire quantity of BTC futures positions presently open on derivatives exchanges. The metric accounts for each lengthy and brief positions.

When the worth of the metric is low, it means traders aren’t utilizing a lot leverage proper now. Such values often lead to low volatility within the value of Bitcoin.

Then again, excessive values of the indicator recommend that futures contract customers are presently utilizing a excessive quantity of leverage. This example can result in excessive volatility available in the market as large value swings can lead to a liquidation squeeze.

Associated Studying | Alternate Whale Ratio Suggests Bitcoin Dump Incoming

Now, here’s a chart that exhibits the pattern within the BTC open curiosity over the previous 12 months:

The indicator's worth appears to be on the rise not too long ago | Supply: CryptoQuant

As you possibly can see within the above graph, worth of the Bitcoin open curiosity seems to be to be climbing up in the previous couple of weeks.

The quant has marked within the chart the earlier occasions the indicator confirmed equally excessive values. It’s clear that sooner or later after reaching these values, the metric has had a pointy decline.

The sudden lower within the open curiosity implies {that a} leverage flush came about at these occasions. Such a squeeze occurs when liquidations cascade collectively in response to a swing within the value of Bitcoin.

Throughout such leverage flush incidents within the interval of the chart, the worth of the crypto additionally appears to have crashed alongside it. Which means that these earlier liquidations principally concerned lengthy positions.

Associated Studying | Why Did China Ban Bitcoin Mining? Right here Are The Seven Main Theories

Because the market appears to be overleveraged proper now as hinted by the open curiosity values, it’s potential an analogous liquidation occasion might happen within the close to future.

BTC Value

On the time of writing, Bitcoin’s value floats round $46.7k, down 5% within the final seven days. Over the previous month, the coin has misplaced 12% in worth.

The under chart exhibits the pattern within the value of BTC over the past 5 days.

BTC's value appears to have struggled in the previous couple of days | Supply: BTCUSD on TradingView

Prior to now week, Bitcoin appears to have once more began consolidating within the $45okay to $50okay vary. It’s unclear in the mean time when the coin could escape this sideways motion, but when the open curiosity is something to go by, a liquidation occasion could occur quickly.

Featured picture from Unsplash.com, charts from TradingView.com, CryptoQuant.com


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