Bitcoin On-Chain Data Signals A Long Squeeze Brewing In Futures Market

On-chain knowledge reveals the Bitcoin open curiosity is sharply rising, an indication {that a} lengthy squeeze could also be brewing within the crypto futures market.

Bitcoin Open Interest Has Observed Rise Recently, While Funding Rates Remain Positive

As identified by an analyst in a CryptoQuant post, the futures market could also be heading in the direction of an extended squeeze within the close to future.

The “open interest” is an indicator that measures the overall quantity of Bitcoin futures positions at the moment open on derivatives exchanges. It contains each lengthy and quick positions.

An rising worth of the metric suggests customers are opening extra positions proper now. Such a pattern can lead to greater volatility within the crypto’s worth.

On the opposite hand, a lowing open curiosity can imply positions on exchanges are closing down. A fast swing within the worth may cause a mass liquidation, sharply taking the indicator’s worth down.

Related Reading | Bitcoin Bearish Signal: Whale Ratio Continues To Stay At High Value

These liquidations cascade collectively, amplifying the value transfer. Such an occasion is known as an extended or quick liquidation “squeeze” (relying on the path of the value change).

Now, right here is a chart that reveals the pattern within the Bitcoin funding charges over the previous couple of weeks:

Bitcoin Open Interest And Funding Rates

Looks like the worth of the metric has moved up not too long ago | Source: CryptoQuant

As you possibly can see within the above graph, the Bitcoin open curiosity has noticed a major improve in the previous couple of days.

The chart additionally contains the info of one other indicator, the “funding rates.” This metric measures the periodic price that futures merchants have to pay one another.

A constructive worth reveals there are extra lengthy merchants available in the market in the mean time as they are paying a premium to maintain their positions.

On the opposite, a adverse worth implies a brief sentiment is dominant proper now. Looking on the graph, it looks like the Bitcoin funding charge is constructive at the moment.

This implies that many of the current improve within the open curiosity has to be due to new lengthy positions opening.

Related Reading | Bitcoin Dominance Remains High As Market Sell-Offs Settle

Historically, a really excessive open curiosity has often resulted in a liquidation squeeze. Since longs are dominant proper now, an extended squeeze is possible if the value observes a steep decline.

BTC Price

At the time of writing, Bitcoin’s worth floats round $30.5k, up 1% within the final seven days. Over the previous month, the crypto has misplaced 21% in worth.

The beneath chart reveals the pattern within the worth of the coin during the last 5 days.

Bitcoin Price Chart

The worth of Bitcoin appears to have surged previous the $30k mark | Source: BTCUSD on TradingView
Featured picture from Unsplash.com, charts from TradingView.com, CryptoQuant.com

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