CRYPTONAIRE
WEEKLY CRYPTO investment journal
Bullish uptrend intact as Bitcoin futures open interest hits $22.5B
Bitcoin may be en route to retest underlying support levels but the record $22.5 billion open interest on BTC futures shows bulls expect the uptrend to continue. Bitcoin (BTC) price has rallied 22.5% in March, but as the price moved up, some buyers began to use excessive leverage, according to derivatives data. Meanwhile, futures open interest reached a $22.5 billion record-high, causing investors to question how sustainable the current rally is. Being optimistic, especially during a bullish market, can’t be deemed worrisome. Still, a yellow flag is raised when buyers use excessive leverage because this could lead to large liquidations during a sell-off. After peaking at $58,300 on Feb. 21, Bitcoin faced a 26% correction over the following week. That move wiped out over $4.5 billion worth of futures contracts, therefore virtually eliminating any excessive buyers’ leverage, which was confirmed by the annualized premium on the 1-month futures contract dropping to 17%. On March 13 the open interest on BTC futures reached a record $22.5 billion, representing a 39% monthly increase. To assess whether the market is overly-optimistic, there are a couple of derivatives metrics to review. One is the futures premium (also known as basis), and it measures the price gap between futures contract prices and the regular spot market. Read more...
Cryptonaire Weekly | March 16th 2021
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