According to data from Coinglass, a cryptocurrency derivatives analysis platform, during the decline in Bitcoin (BTC) price, the nominal open interest (OI) of Bitcoin futures and perpetual futures decreased from $37 billion to $30.2 billion within a month, representing a decrease of approximately 18%. Bitcoin open interest is a key indicator for measuring market sentiment.
Source:
Coinglass
These data seemingly indicate that long positions expecting price increases or bullish leveraged bets have been closed in the past four weeks. However, this interpretation may only be partially correct and obscures the bullish undercurrents in the market.
Open interest refers to the number of active or outstanding contracts within a specific period of time. The calculation method for nominal open interest is multiplying the unit quantity of a contract by its current spot market price. Therefore, even if the total contract volume remains stable, fluctuations in asset prices can still impact nominal open interest and create a misleading picture of market activity. This appears to be the case in the Bitcoin market.
Coinglass data shows that open interest denominated in BTC has remained above 500k BTC over four weeks. At the same time, perpetual contract funding rates on exchanges have consistently shown positive values, indicating a tendency towards bullish bets in the market.
Source:
Coinglass
Stable open interest (denominated in BTC), positive funding rates, and decreasing nominal open interest suggest that some traders are establishing new long positions to offset liquidations of bearish bets by other market participants. Laurent Kssis, an expert on cryptocurrency ETFs at CEC Capital believes this indicates that traders have not hesitated to set up long positions yet.
Similar conclusions can also be drawn from sustained positive spreads between futures prices and spot prices (widely known as basis). Noelle Acheson, author of “Crypto Is Macro Now” newsletter mentioned during an interview with CoinDesk:
Activity in spot and options markets indicates upward preference.
Accordingly to Griffin Ardern – Head Trader & Researcher for Options at BloFin Crypto Financial Platform