Anika Begay
Data shows that Bitcoin’s open interest plummeted when BTC broke above the $60,000 level, suggesting that large liquidations have occurred.
Bitcoin’s open interest plummets as shorts see a squeeze
In a new post on X, CryptoQuant Head of Research Julio Moreno discusses the latest trend that has developed in Bitcoin Open Interest. “Open Interest” here refers to an indicator that tracks the total number of BTC derivative positions currently open across all exchanges.
When the value of this metric rises, it means that investors are opening new positions in the market at this time. Since total leverage in the industry usually increases when new positions emerge, this trend can lead to greater volatility in the asset price.
On the other hand, the indicator that is declining implies that the holders are closing their positions of their own volition or are being liquidated by their platform. Typically, the price becomes more stable following this trend due to the reduction of leverage.
Here is a chart showing the performance of Bitcoin Open Interest over the last week or so:
The value of the metric appears to have gone through a steep drawdown in recent days | Source: @jjcmoreno on X
In the chart, Bitcoin’s Open Interest is denominated in BTC, rather than USD, as is normally the case. The advantage of being denominated in BTC is that its value is not distorted by changes in the coin’s price.
The chart shows that the indicator had seen a sharp decline a few days ago, as the asset had suffered a crash. This crash caused a large amount of long-term liquidation, resulting in a decline in the metric.
In the last 24 hours, the opposite seems to have happened, as a sharp rally has instead induced a high amount of short liquidations in the market. Naturally, Open Interest has seen another crash, thanks to this.
CoinGlass data provides the exact numbers involved in Bitcoin’s latest short squeeze.
The liquidations that have occurred during the last 24 hours for each symbol | Source: CoinGlass
As seen above, Bitcoin contracts have seen liquidations amounting to over $94 million in the past day, nearly double that of second-place Ethereum (ETH) (just under $53 million).
The entire cryptocurrency derivatives sector saw $212 million in liquidations during this window. Shorts made up the majority of this wave with $137 million in liquidations.
The data for the total market liquidations | Source: CoinGlass
Given the magnitude of the short squeeze, it is likely that the sharp rise in the price of Bitcoin was partly fueled by this cascade of liquidations.
BTC Price
At the time of writing, Bitcoin is hovering around $60,300, down about 8% in the last seven days.
Looks like the price of the asset has gone through recovery recently | Source: BTCUSD on TradingView
Featured image by Dall-E, CoinGlass.com, chart by TradingView.com
