HomeNewsBitcoin's record open interest signals impending volatility: here's what you can expect

Bitcoin’s record open interest signals impending volatility: here’s what you can expect

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  • Bitcoin and Ethereum face record open interest volatility, indicating caution for possible new all-time highs.
  • Bitcoin funding rates exceed 100% on Binance, revealing an effervescent market with high financial risks.

Bitcoin gives us a lot to talk about. Remember when Bitcoin broke all records in November 2021, reaching over $69,200? This milestone, underscored by growing institutional interest, not only pushed its market capitalization past the trillion dollar mark but also ushered in a new era for the digital asset.

Open interest in Bitcoin, which quantifies total derivative contracts such as futures and options not yet settled, recorded a value of $31 billion on March 4. This surpasses the previous high of $24.3 billion on April 14, 2021, evidencing an increase in trading activity and potentially, greater interest in Bitcoin.

Bitcoin open interest as of March 4, 2024. Source: CoinGlass

During this period, the Bitcoin price approached current levels, starting at $63,524 and experiencing a 23% decline to $49,078 by April 26, 2021. This fluctuation underscores the volatility of the market at that time.

Ethereum open interest as of March 4, 2024. Source: CoinGlass

Separately, Ethereum futures open interest stood near $12 billion as of March 4, approaching the $13 billion high seen on Nov. 9, 2021, when Ethereum posted a record opening price of $4,810.

However, on November 19, Ethereum’s value declined to $3,996, down 17% from its peak value. This behavior indicates that open interest in Ethereum futures brushed its highest level against a backdrop of notable price volatility, followed by a significant adjustment in the price of Ethereum after reaching its highest value.

This is evidenced by Bitcoin’s recent rally, which after a slight dip to $60,000, soared again to around $67,000, evidencing its resilience and sustained market interest.

Volatility at the door: a sign to proceed with caution

Let’s speak plainly, open interest in Bitcoin and Ethereum is skyrocketing, setting record highs that lead us to ponder the impending volatility of these crypto giants. Does this scenario sound familiar?

It sure does, as the current frenzied trading activity and surge in open interest is very reminiscent of the 2021 rally, as previously reported by ETHNews. This market déjà vu not only suggests that we could be on the doorstep of new all-time highs, but also invites us to exercise a dose of caution.

And what do the funding rates in perpetual Bitcoin futures, exceeding 100% on Binance, tell us? Exactly, that we are facing an effervescent market, with risks that we cannot ignore. This increase signals that the volume of open positions in BTC and ETH in derivatives is reaching alarming peaks, as ETHNews indicated earlier.

But it’s not all uncertainty and speculation

Despite FOMO and market swings, Bitcoin and Ethereum’s fundamentals remain solid, promising new highs in this cycle. As previous ETHNews reports indicated, it is crucial to remain composed and not get carried away by the euphoria of the moment.

History has shown us that even in the most volatile markets, those who keep their cool and follow their game plan without getting carried away by emotions are the ones who end up coming out ahead.

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Isai Alexei
Isai Alexei
As a content creator, Isai Alexei holds a degree in Marketing, providing a solid foundation for the exploration of technology and finance. Isai's journey into the crypto space began during academic years, where the transformative potential of blockchain technology was initially grasped. Intrigued, Isai delved deeper, ultimately making the inaugural cryptocurrency investment in Bitcoin. Witnessing the evolution of the crypto landscape has been both exciting and educational. Ethereum, with its smart contract capabilities, stands out as Isai's favorite, reflecting a genuine enthusiasm for cutting-edge web3 technologies. Business Email: info@ethnews.com Phone: +49 160 92211628