Information exhibits Bitcoin value drops days after BTC futures open curiosity hits $1B

There was a time when BitMEX derivatives alternate reigned sovereign over different exchanges, and the corporate successfully held a 50% market share until July 2019. For that reason, merchants stored a detailed eye on each indicator linked to BitMEX, together with its funding price, open curiosity, and foundation.

Open curiosity measures the full variety of contracts held by market contributors. Because the determine rises larger, so does the potential dimension of liquidations. On Aug. 2, a $1,400 crash happened as $1 billion in futures contracts have been forcefully closed attributable to inadequate margins.

Though there is no such thing as a magic quantity, merchants are inclined to get shaky as open curiosity nears $1 billion, inflicting a phenomenon some merchants confer with because the BitMEX ghost. This grew to become evident in the course of the second half of 2019, when large Bitcoin value crashes occurred on seven completely different cases when open curiosity tops $1 billion.

The perceived threat related to excessive open curiosity relies on how liquid the underlying asset is. Through the third quarter of 2019, Bitcoin’s common quantity on spot exchanges averaged $2.four billion per day. Thus, a single contract totaling 42% of the Bitcoin quantity appeared sizeable sufficient.

Bitcoin value vs. BitMEX perpetual open curiosity, USD. Supply: TradingView

Because the chart above depicts, there may be little doubt that open curiosity close to $1 billion coincided with related value crashes from July by September. It’s price noting {that a} notable variety of contracts in play can’t be deemed bullish or bearish.

The second half of 2019 was largely bearish

The latter half of 2019 was fairly tough for cryptocurrencies, and as most traders will recall, even President Trump publicly bashed Bitcoin, as reported by Cointelegraph. All this occurred whereas america Treasury Secretary Steven Mnuchin demanded additional regulation and oversight for the sector.

Combination Bitcoin futures open curiosity on Nov. 2019, USD. Supply: Skew

The chart above exhibits a lot better element of how related BitMEX’s 40% market share was again then. A single alternate held an open curiosity equal to half of Bitcoin’s day by day spot quantity.

Quick ahead to 2020, and BitMEX has been dethroned by OKEx, the place the full open curiosity on perpetual and fixed-month futures surpassed $1 billion on July 25.

Combination Bitcoin futures open curiosity, USD. Supply: Skew

The remaining contenders stored rising their share, however it was solely lately that Chicago Mercantile Change (CME), Binance, and Bybit managed to interrupt the psychological $1 billion barrier.

Right this moment’s market marginally resembles 2019, however with much less threat

Oddly sufficient, this occurred on Nov. 20, simply 4 days forward of the 16% crash to $16,334. The entire futures open curiosity on Sept. 2019 totaled $Three billion to place issues in perspective. This time round, 4 exchanges have been in a position to break the $1 billion barrier.

Though futures open interest grew to $7.4 billion, so did the day by day common quantity on common spot exchanges the place the determine now reads $3.5 billion. Thus, in contrast to the earlier yr, a single alternate holding a $1 billion open curiosity shouldn’t elevate eyebrows in the identical method that it did in 2019. 

To sum up, the markets have grown and developed to the extent that the BitMEX ghost is gone however it may need been changed by an analogous phenomenon that happens when 4 exchanges cross the $1 billion futures open curiosity mark.

Regardless, one ought to preserve a detailed eye on such an indicator to any extent further as these 4 exchanges have changed BitMEX because the market chief. Mixed, Binance, CME, OKEx, and Bybit maintain over half of the futures’ open curiosity. Though such a coincidence has solely occurred as soon as, it certainly mimics the $1 billion impact from the previous.

The views and opinions expressed listed below are solely these of the author and don’t essentially replicate the views of Cointelegraph. Each funding and trading transfer includes threat. You need to conduct your individual analysis when making a choice.