Bitcoin futures (BTC) volume and open interest rates are declining rapidly. The data shows that BTC futures have fallen since the September peak 60% from over $ 25 billion to around $ 10 billion.
Although a reduction in trading activity at first glance may seem negative, it may also indicate a bullish cycle.
Why reduced activity in the futures market may increase the price of bitcoin
The futures market bitcoin accounts for most transactions with high influence in the bitcoin market, and popular platforms such as Binance, BitMEX and ByBit offer up to 125 times leverage.
When traders have a high level of influence, they are wound up. For example, if a $ 10,000 10-time contract is terminated at $ 9,000, this forces the buyer to sell the position in the market.
Assuming that a large number of traders are in similar positions, the sales pressure increases and can trigger a sharp fall in the bitcoin price.
If the futures market reveals interest and up-potential, it puts Bitcoin in a weak position and increases the likelihood of successive liquidations such as those seen during the infamous Black Thursday, when more than $ 1 billion in futures was liquidated due to the fall in the price of Bitcoin. under 3600. Dollars.
A reduction in the size of futures contracts can be seen as a potential bullish event, as small price action can usually turn into large price fluctuations if a collective settlement is triggered at a certain price level.
Thus, lower volume and open interest in the futures market can pave the way for a stable long-term rally.
During beef markets, there are often several spikes in open interest, but the market remains neutral for a long time, giving an immediate bounce of volume. As shown in the chart below, the spot volume increased slightly while the volume on the futures market fell.
Despite the fact that it did not appear on the chart, LMAX Digital, a bitcoin spot exchange aimed at companies, recently joined Coinbase to become the largest spot exchange. Kyle Davis, co-founder of Three Arrows Capital, explained:
BTC indices are not a niche industry: 1) BTC has a strong relationship with stocks and commodities, but you only trade cryptocurrency 2) LMAX is the largest BTC USD exchange, but you do not have an account on it 3) Trades billions of dollars you’ve never heard of before …
Given the growth in institutional demand, higher spot volume and lower open interest in futures contracts, the continued trend can be seen as an upward trend.
What traders expect in the short term
In the short term, traders expect consolidation to continue below the $ 11,000 resistance level, which may extend the decline in futures volume.
Cryptocurrency trader Edward Moura said liquidity shows that Bitcoin is likely to face more sideways trading. He said:
“My current opinion is that either the local peak is at the top or another high to stop the stop. This left a lot of liquidity below the price. ”