Cryptocurrency analytics firm Alphractal has published a new report outlining concerns about the current state of Bitcoin’s open interest, suggesting that it could pose a risk to the market.
According to Alphractal, open interest in Bitcoin’s futures market has grown impressively since 2020, exceeding $42 billion. This growth reflects the increasing interest in leveraged trading among investors, especially on major exchanges. The Chicago Mercantile Exchange (CME) currently holds 26.3% of all positions, while Binance accounts for 20.2% of the market.
Alphractal’s analysis reveals a general trend: when the price of Bitcoin rises, open interest tends to increase as well. However, the firm noted that the current state of the market is showing signs of cooling, reminiscent of patterns observed in 2021.
The $38 billion resistance level in open interest has become a significant hurdle for Bitcoin’s short-term prospects. Alphractal notes that this level represents a pivotal point and that understanding institutional activity will be crucial for Bitcoin to gain upward momentum.
Alphractal warns that if the annual open interest delta crosses into negative territory, it could signal a downtrend driven largely by a lack of institutional participation. This decline could signal that the market is experiencing a downturn similar to previous cycles, and underscores the importance of closely monitoring institutional interest for signs of a market recovery.
*This is not investment advice.