Bitcoin open interest, the value of all open BTC derivatives positions, has dropped more than 25% this year. This comes as the cryptocurrency broke through the $23,000 resistance level over the weekend and caught short traders off guard, leading to a short squeeze that delivered millions in losses to those betting against the crypto market.
Bitcoin Open Interest is Down by 26% Year-to-Date
Bitcoin surged above $23,000 on Saturday, its highest level since August last year. The cryptocurrency has since avoided losses, hovering above the $22,000 mark. The coin is trading at around $22,800, up by more than 33% over the past 14 days.
Amid recovering spot prices over the past two weeks, BTC option trade volumes on Deribit exceeded $3 billion, hitting their highest level since November 2022, according to a report by Kaiko. Most incoming bets are bullish, as the share of call options relative to put options volume has risen to more than 66%, the highest level in over a year.
Meanwhile, Bitcoin open interest has dropped by more than 26% this year. The plunge in OI comes as short traders have been caught off guard amid the recent rally. With the leading cryptocurrency gaining over 38% year-to-date, 50k BTC worth of positions has been closed, suggesting short positions have been liquidated at higher prices. Kaiko noted:
“While lower levels of open interest usually indicate less interest in markets, the removal of leveraged positions could be exactly what crypto markets need at present, with price discovery returning to spot markets.”
According to data by CoinGlass, short traders suffered around $492 million in losses across major centralized exchanges on January 14, when Bitcoin broke above $21,000. Traders betting against the crypto market also saw over $235 million in losses on January 20 as Bitcoin rallied to above $23,000.
Bitcoin Aggregated Open Interest Drops to 7-Months Low
The aggregated open interest of Bitcoin Futures, the total number of futures contracts, plus stablecoin-margined contracts, has dropped to its lowest since July last year. Currently, the aggregated open interest of Bitcoin futures stands at $8.3 billion.
Generally, as open interest decreases, it’s often a sign the trend is beginning to wane. It can also indicate that many short or long positions are getting liquidated. Data by CoinGlass shows that around $1.6 billion worth of short contracts and $920 million worth of long positions have been liquidated over the past two weeks.
As reported, Bitcoin open interest increased by $1.6 billion in a matter of days back in October, with aggregated open interest reaching $10.73 billion. The aggregated open interest saw a massive decline starting in early November in line with the implosion of FTX.
Meanwhile, Bitcoin is trading around $22,878, almost flat over the past day. Ethereum, the second-largest cryptocurrency, is changing hands at around $1,600, down by around 1% over the past day. Furthermore, the total crypto market cap sits at above $1 trillion.
Defying the current trend are the native tokens of Ethereum liquid staking platforms, which continue to register gains amid the news that Ethereum devs have successfully run a “shadow fork” of the Shanghai upgrade, which will include code allowing withdrawals of ETH staked in the Beacon Chain.
Lido’s LDO has gained around 7% over the past day, while Rocket Pool’s RPL is up by 10.9%. Both tokens are up by more than 177% and 96% over the past month, respectively.