Bitcoin Open Interest Hits Record $40 Billion; Bullish Outlook Bolstered by Macro Factors, Says Report

Bitcoin has just experienced a minor pullback, dropping 2.4% since yesterday. The minor correction comes as BTC made its way higher toward the US$70k (AU$105k) mark over the past few weeks.

Over the weekend, it had hit the previous high reached just before the Nashville Bitcoin Conference, with US$68,560 (AU$103,036) on 22 July. During the conference – which saw speeches by former US president Donald Trump and Robert F. Kennedy – BTC reached US$70,162 (AU$105,428) amid some interesting revelations.

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Trump told an excited audience that he’d fire the unpopular US Securities and Exchange Commission (SEC) Chief, Gary Gensler, on day one. He also promised to include Bitcoin into the federal reserves.

Trump also told the crowd, “Never sell your bitcoin”.

So, no wonder that Bitcoin has been doing well, given the former president’s favourable odds on Polymarket. General polls also see a tight race between Trump and Harris, though some experts have argued it doesn’t matter who moves into the White House next, Bitcoin will do well.

Rising Open Interest Hits New High, Underscores Bullish Sentiment

So, despite this minor setback, the case for Bitcoin remains bullish. A report by Bitfinex shows that open interest (OI) has hit a new all-time high (ATH) of US$40.38 billion (AU$60.69). Open interest is a valuable metric as it provides traders with what the market’s sentiment is toward an asset. Increasing OI signals a growing bullish sentiment.

Data from Coinglass shows the OI surge, which exceeds past levels despite the price not hitting a new ATH.

In basic terms, Bitcoin open interest is the total number of active Bitcoin futures or options contracts in the market, representing the total investment in these derivatives. It increases when traders enter contracts to speculate on Bitcoin’s price movements without owning the actual Bitcoin, and decreases as these contracts are settled or expire.

Analysts Note Pattern in Bitcoin Open Interest

Interestingly, the analysts at Bitfinex have observed a pattern in Bitcoin’s OI, noting that during times of high OI, like the previously mentioned “Trump trade” peak in July, Bitcoin’s price often does not reach new highs. This suggests a disconnect between market speculation and stable demand.

They argue that while high open interest can indicate speculative excess, leading to potential market corrections, it isn’t inherently negative.

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For instance, they reference the breakout in October 2023, where a significant rise in OI accompanied a surge in Bitcoin’s price above US$30k (AU$45k), indicating robust market participation.

The analysts explain, “Much like price movements, OI can experience impulses followed by periods of consolidation.”

Their analysis suggests that while short-term pullbacks are possible, the overall market dynamics, supported by macroeconomic factors and balanced trading activities, are conducive to sustained price growth.