Biyjie Network reports:
Author: Omkar Godbole, CoinDesk; Translator: Deng Tong,
Despite a decline in nominal open interest, the open interest in Bitcoin terms and the positive funding rate have remained stable.
Observers say this is a sign of renewed demand for long positions during the price decline.
Data shows that nominal open interest in Bitcoin (BTC) futures and perpetual futures, an important market sentiment indicator, has fallen by about 18% from $37 billion to $30.2 billion over a month, while the cryptocurrency spot market price has also dropped by 14%.
At first glance, the data suggests that long or bullish leveraged bets expecting a price increase have subsided in the past four weeks. In other words,
the unwinding of bullish bets pushed Bitcoin prices lower.
This explanation is, at best, partially correct and obscures the bullish undercurrent in the market.
Open interest refers to the number of active or outstanding contracts at a given time, and nominal open interest is calculated by multiplying the unit number of a contract by the current spot market price. Therefore, even if the total number of contracts remains stable, changes in asset prices can affect nominal open interest, creating a misleading impact on market activity.
This appears to be the case in the Bitcoin market.
According to data from Coinglass,
open interest has remained stable above the 500,000 BTC mark for the past four weeks. Meanwhile, the perpetual funding rate charged by exchanges every eight hours has remained positive, indicating a bias towards bullish bets.
BTC futures open interest denominated in BTC. (Coinglass)
The stability of Bitcoin holdings, positive funding rates, and the decline in nominal holdings suggest that some traders have been building new long positions, offsetting the impact of the so-called unwinding of bullish bets by other market participants.
CEC Capital crypto ETF expert Laurent Kssis stated that this indicates traders are still not hesitating to go long.
“This assumption is indeed correct. Additionally, with the market still highly uncertain, more protective strategies are being implemented. Don’t forget that late-stage liquidity flushes were enough to push the market below the $60,000 mark. Hesitation in holding long orders is still not dominant, but hedging is a considerable part of the trades.”
Perhaps traders are hoping that once the compensation from Mt. Gox and the selling pressure from miners are exhausted, Bitcoin may resume its upward trend, staying in sync with the Nasdaq index.
BTC OI weighted funding rate. (Coinglass)
A similar conclusion can be drawn from the continued positive spread between futures and spot prices, broadly referred to as the basis.
“The basis has slightly declined but remains attractive, so there is still demand for long positions as part of basis trading, and with macro tailwinds accumulating and selling pressure likely to dissipate soon, expectations of a breakout are increasing, thus strategic longs may accumulate at lower funding rates.
Activity in the spot and options markets also suggests an upward inclination.
Griffin Ardern, head of options trading and research at crypto finance platform BloFin, stated that the cryptocurrency exchange Bitfinex has been a source of bullish pressure during the price decline.
“Since the end of June, Bitfinex whales have been buying on dips, but I haven’t observed similar signals in other derivatives markets,” Ardern pointed out.
Since June, Bitfinex’s margin longs (involving the use of borrowed funds to buy assets in the spot market) have steadily increased.
BTC margin long positions. (Coinglass)
Meanwhile, according to QCP Capital, traders have been buying upside bets in the options market.
“Despite the sell-off, the options market remains heavily skewed to the upside, implying the market still expects a rebound by year-end,” QCP said in a market update on Wednesday: “This aligns with the significant buying interest observed by the trading desk in long-term options for $100,000/120,000.”
