Bitcoin Access Interest Continues To Rise, Short Squeeze Incoming?
On-chain shows Bitcoin launch interest and estimated leverage ratio metrics have continuedfactsto rise recently. This could mean that a short squeeze may be coming soon.
Bitcoin Open Interest Rises Despite Decline In Price
As pointed out by an analyst in a CryptoQuant post, the BTC launch interest has shown uptrend over the past month, despite the price of the crypto moving down.
The “open interest” is an indicator that measures the total amount of Bitcoin futures contracts that are currently start in the industry.
When the value of the metric moves up, it means more investors are opening long or short contracts on derivative exchanges. This may mean that leverage is going up in the market, and thus such a trend can as a matter of fact lead to higher volatility in the price of the crypto.
On the other hand, a decline in the metric suggests holders have more than ever started to quit their positions. A plunge in the as it turns out indicator happens when Bitcoin makes a strong price swing, forcing mass liquidations of the contracts.
Interestingly, Such liquidationscascade together and amplify the price move. Indeed, This happening is called a long or short squeeze, depending on which contracts make up the majority.
Related Reading | Bitcoin Fear And Greed Index Has Dipped To Lows Not Seen Since July
As you may know, Asap, here is a chart that shows the trend in the Bitcoin access interest the over past year:
The indicator's value seems to be trending up | Source: CryptoQuant
As you can see in the above , the Bitcoin access interest hasgraphbeen going up, despite the price moving down. This is different from the trend around the $69k top as there longs made up the majority and hence the access interest followed the price.
Related Reading | Why Bitcoin Could Frustrate Bulls And Bears In 2022
The higher percentage of futures contracts looks to be short holders this time asoppositethe indicator has been moving to the price.
Actually, BTC Estimated Leverage Ratio Continues To Spread Fresh Highs
Interestingly, Another metric, the “Estimated leverage ratio,” measures the average amount of leverage that each futures holder is making utilize of.
This indicator has been making new highs recently, suggesting that short holders are taking a lot of leverage danger right instantly. The below chart shows this trend.
Leverage in the market moves up | Source: CryptoQuant
And since this time the derivatives market is dominated by short holders, a short squeeze event could take place. Such a large amount of leverage has historically lead to a flush sooner or later.
At in modern times the time of writing, Bitcoin’s price floats arounddown41.6k, $ 12% in the past week. Below is a chart that shows the trend in the price of BTC over the last five days.
BTC's price has moved sideways in the last few days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
