On-chain data shows that open Bitcoin contracts have reached dangerously high values, indicating that leverage flushing may be imminent.
Bitcoin open interest rises to high value
As an analyst pointed out in CryptoQuant postal, BTC open positions have now reached the value of large-scale liquidation in the past.
This”Open position“It is an indicator that measures the total amount of BTC futures positions currently opened on derivatives exchanges. This indicator takes into account long and short positions.
When the value of this indicator is low, it means that investors are not currently using much leverage. Such a value usually leads to low volatility in the price of Bitcoin.
On the other hand, the high value of this indicator indicates that users of futures contracts are currently using a lot of leverage. This situation may lead to a high degree of market volatility, because large fluctuations in prices can lead to liquidation squeeze.
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Now, here is a chart showing the trend of open BTC contracts in the past year:
The indicator's value seems to be on the rise recently | Source: CryptoQuant
As you can see in the graph above, the value of Bitcoin’s open positions seems to be climbing in the past few weeks.
The quantitative indicator marks the time when the previous indicator showed similar high values on the chart. Obviously, at some point after reaching these values, the indicator drops sharply.
The sudden decrease in open positions means Lever flush It happened at that time. This squeeze occurs when liquidation cascades in response to Bitcoin price fluctuations.
In such a leverage washout event during the chart period, the price of cryptocurrencies seems to have also plummeted. This means that the previous liquidation mainly involved long positions.
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Since the market implied by the value of open positions currently appears to be over-leveraged, similar liquidation events may occur in the near future.
At the time of writing, Bitcoin price Floating around US$46,700, it has fallen by 5% in the past 7 days. In the past month, the value of the token has fallen by 12%.
The chart below shows the price trend of BTC over the past five days.
BTC's price seems to have struggled in the last few days | Source: BTCUSD on TradingView
In the past week, Bitcoin seems to have begun to consolidate again in the range of $45,000 to $50,000. It is not clear when the tokens can get rid of this lateral movement, but if the open positions can pass, a liquidation event may happen soon.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com