A cryptocurrency analyst has pointed out how the Open Interest for Bitcoin and the altcoins is forming a setup that previously led to a market downturn.
When the value of the Open interest rises, it means speculative interest in the market is going up as traders are opening up fresh positions. Generally, new positions come with more leverage for the sector, so volatility can go up following a jump in the metric. On the other hand, the indicator going down implies investors are either pulling back on risk or getting forcibly liquidated by their platform. Such a washout of leverage typically results in greater market stability.
Now, here is the chart shared by Maartunn that shows the trend in the Open Interest for Bitcoin and that for all altcoins combined over the last couple of years:
From the chart, it’s visible that something like this also occurred in December 2024. “Back then, it led to months of sideways chop followed by a 30%+ drop,” notes the analyst.
The market could already be starting to feel the effects of heating in the Open Interest as Bitcoin and the altcoins have gone through notable volatility in the past day.
BTC plunged from above $125,000 to below $121,000 in the matter of a few hours, before recovering back near $123,000. Others, like Ethereum, are yet to make any significant recovery from the plunge.
At the time of writing, Bitcoin is trading around $122,900, up over 5% in the last week.
