Bullish uptrend intact as Bitcoin futures open interest hits $22.5B

CRYPTONAIRE LYWEEK

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.

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