Market Analysis

Bitcoin open interest matches record high amid predictions of BTC price ‘fireworks’ this month

Open interest combined with flat funding rates suggests that an "explosive" volatility period is inbound, analysts say.

Bitcoin (BTC) is in line for “explosive” price action as derivatives markets return to form in 2022, a new forecast states.

In a tweet on Jan. 4, Vetle Lunde, an analyst at Arcane Research, confirmed that BTC denominated open interest (OI) had returned to all-time highs seen in November.

Open interest demands “fireworks” within weeks

Bitcoin futures and options have taken a beating during the end-of-year BTC/USD retracement, but as the holiday period ended, consensus began to form around a major comeback.

Institutional traders should become the major force on Bitcoin markets, some say, and derivatives are already showing signs of that renewed interest.

OI is now back at the levels it last hit in week three of November when BTC/USD itself reached all-time highs of $69,000.

Unlike then, however, funding rates are currently neutral — a key foundation for forming a volatile move.

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“BTC denominated open interest in BTC perpetuals surpassed November highs today with the leverage accumulating on neutral to slightly below neutral funding rates. Seems explosive tbh,” Lunde commented.

Bitcoin open interest matches record high amid predictions of BTC price 'fireworks' this month

BTC OI vs. Binance funding rate annotated chart. Source: Vetle Lunde/ Twitter

Lunde is not alone. In a separate post on Jan 3., Filbfilb, co-founder of trading platform Decentrader, likewise noted the encouraging state OI activity.

“OI very high relative to Market Cap… doubt we see it going beyond the final week of this month without fireworks,” he wrote.

Ethereum hits first high of 2022

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD trading near $47,380 at the time of writing Dec. 4, meanwhile, recovering from a dip that took the pair to two-week lows.

Related: Bitcoin exchange balances trend back to historic lows as BTC withdrawals resume in January

While analysts were broadly calm about the action on short timeframes, it was altcoins still forming the main point of interest.

Read more:  Bitcoin price crashes below $48K, but is the bull market in danger?

“The point of maximum financial opportunity for altcoins is still now,” Cointelegraph contributor Michaël van de Poppe argued, reiterating previous convictions about the opportunities presented by alt markets.

Bitcoin open interest matches record high amid predictions of BTC price 'fireworks' this month

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Ether (ETH), the largest altcoin by market cap, reached $3,879 on the day, its best performance of 2022 so far.

Bitcoin open interest matches record high amid predictions of BTC price 'fireworks' this month

ETH/USD 1-hour candle chart (Bitstamp). Source: TradingView

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