Open interest in Bitcoin derivatives just hit a new record as the price of BTC nears the $70,000 level.
CoinGlass reported that open interest, the OI for Bitcoin futures contracts reached an impressive $40.5 billion.
Leverage traders
Open interest refers to the total value or number of futures contracts that remain active and haven’t yet expired, so basically it reflects the amount of money invested in Bitcoin derivatives at any moment.
When OI is high, it often means increased leverage and potential volatility in the market.
The Chicago Mercantile Exchange holds the largest share of this open interest at 30.7%, followed by Binance with 20.4% and Bybit at 15%.
When markets are hot, things have to cooling down?
When open interest is high and prices change dramatically, it can trigger a chain reaction of liquidations, leading to forced selling in the spot market.
This phenomenon can create the so-called flush outs, causing sharp drops in Bitcoin’s price.
The last major flush out occurred in early August when BTC fell nearly 20%, or about $12,000, in less than two days, dropping below $50,000.
Rise and shine, or crash and burn?
Now Bitcoin is riding high, reaching $69,380 in early trading on October 21, but then it faced resistance and pulled back slightly to around $69,033 at the time of this report.
This puts Bitcoin just 6.4% below its all-time high of $73,738. And 6% is really not a big jump.
Analysts think if Bitcoin manages to break above $70,000, it could give a serious boost to alts like Ether and Solana, even when both of these cryptocurrencies are currently outperforming Bitcoin in daily gains.
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