Bitcoin price sees open rate rise, rally will be short-lived?
Bitcoin price is once again trading above $20,000, its 2017 all-time high, with bullish momentum on low timeframes. The cryptocurrency has been in a similar situation since losing this level in early 2022, leaving many traders wondering if the bulls will be able to sustain the current price action.
At the time of writing, the Bitcoin price is trading at $20,100 with a 4% gain in the last 24 hours and a 5% gain in the last 7 days respectively. Other cryptocurrencies in the top 10 by market capitalization follow Bitcoin with Binance Coin (BNB) topping the rankings with an 8% gain over the same period.
Bitcoin Price Open Interest Tips on Fresh Bear Assault?
Data from Arcane Research shows that Bitcoin price’s current price action has been followed by an increase in open interest (OI) in the derivatives sector. BTC futures contracts have surged since early October, as market participants bet on future appreciation for the cryptocurrency.
As shown in the chart below, OI denominated in BTC hit a monthly high of 464,500 BTC with the Bitcoin price rising north to $20,000. The spike in OI as price trends up in October indicates traders are taking long positions.
As can be seen from the chart, this is not the first time this month that long has rushed into the price action. In late September, OI skyrocketed in price and longs were flushed as the Bitcoin price returned to its previous support levels, will history repeat itself this time less than a week from that downside move?
Major upside rally for the Bitcoin price may be in the making
On higher timeframes, additional data from Arcane Research shows an increase in open interest as Bitcoin price trends down. The metric has been moving upwards since April 2021, when it saw a slight decline after BTC’s price crashed from $64,000.
At the time, the cryptocurrency recorded its first all-time high that year. In the following months, the Bitcoin price made another test of the highs and reached uncharted territory as OI moved sideways, the biggest peak was recorded when BTC crashed and entered a bear market reaching its current levels.
In other words, traders remained relatively flat when BTC reached $69,000, but started shorting at a high pace when the cryptocurrency went lower. This amount of short-sided open interest could provide enough fuel for another bull run or at least provide enough support for Bitcoin to regain previously lost territory.
Arcane Research analyst Vetle Lunde commented on this rise in Open Interest and its potential implications for the Bitcoin price:
The growth since May is truly remarkable. We will see lively markets every time these positions are (in)voluntarily closed out.
