The number of open contracts in futures can be considered an indicator of market liquidity. However, since the beginning of 2024, the open positions of Bitcoin futures have shown a consistent trend with the price movement. Can we uncover clues through on-chain data?
**Content Overview**
– The correlation between Bitcoin open positions and price is high this year
– In the medium term, trends are diverging
– How to interpret the number of open contracts in relation to market sentiment
On-chain data shows that in recent months, the open interest (OI) of cash-settled Bitcoin futures has experienced significant fluctuations. The charts indicate a strong correlation between the open interest of Bitcoin futures and the spot price.
At the beginning of January 2024, the OI of cash-settled futures across all exchanges started at approximately 280,000 BTC and steadily increased, peaking at around 340,000 BTC by mid-March. After this peak, Bitcoin saw a significant decline, reaching a low near 280,000 BTC in early May. This correlates with the fluctuations in Bitcoin’s spot price, reflecting the volatility of the futures market. Following the halving event in April, open interest rose again, maintaining levels above 300,000 BTC, indicating renewed interest from market participants in trading and preparation for the upcoming trend.
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When we widen our perspective to observe medium-term data, it becomes apparent that from January 2021 to 2023, the number of cash-settled Bitcoin open contracts exhibited a more pronounced upward trend, reaching a peak of 380,000 BTC by the end of 2022. This period encompasses the previous bull market and the subsequent bear market, yet the overall trend of open contracts remains upward. Particularly from late 2023 to early 2024, open contracts significantly increased, surpassing 350,000 BTC. This suggests that, in medium-term data, the volume of open contracts has followed a different trajectory than Bitcoin’s price. Halving events are generally believed to have a substantial impact on Bitcoin prices, leading market participants to increase their positions, reflecting expectations of potential price increases.
Changes in open contract volume can also be viewed as indicators of market sentiment. During price fluctuations, an increase in open contract volume typically signifies more market participants engaging in trading, potentially indicating enhanced bullish sentiment. Conversely, a decrease in open contract volume may suggest a wait-and-see attitude among market participants or growing uncertainty regarding future price movements.
**OI**
**Bitcoin**
**Further Reading**
– Mining Company Financial Reports: Marathon and Riot miss revenue expectations, stock prices plunge over 8% in a single day
– MicroStrategy Financial Report: Introduces “Bitcoin Yield” KPI, issues $2 billion in new stock to buy Bitcoin