Bitcoin Open Interest at Month-Long High Ahead of FOMC Decision

While not a definitive indicator of market sentiment, open interest in futures markets can help shape expectations around the forward price of an underlying asset

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Source: Shutterstock / H_Sutthichai, modified by Blockworks

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Open interest for bitcoin futures contracts remains near one-month highs as demand for digital assets continues to drive this year’s unexpected rally. 

Bitcoin futures are trading at $23,230 as of 6:30 am ET on the Chicago Mercantile Exchange, recovering from a 3.85% loss on Monday. The asset is now up 40% year-to-date.

Open interest, which measures the number of outstanding contracts on the bitcoin futures market, reached a peak of 289,720 last week on the Deribit exchange before dipping to around 260,000, according to published data

That was the highest point for the number of outstanding contracts since the end of last year. 

Interest in traditional finance and economic data has led to greater anticipation of volatility in digital assets, as seen by the increase in futures market activity and the underlying spot price of bitcoin. 

Bullish bets for contracts expiring on Feb. 1 are pointing to a strike price near $23,250, with a put/call ratio of 0.81. Open interest by strike price for contracts expiring on Feb. 3 places bitcoin in the higher range near $24,000, with a put/call ratio of around 0.59, according to Deribit data.

A low put/call ratio below 1 suggests a greater number of call options are being traded relative to put options, which is generally considered a bullish sign as market participants anticipate an upward trend in the underlying asset’s price.

Open interest by strike price refers to the number of outstanding futures or options contracts not yet settled and written at a certain price level. The data can provide information about trader expectations, as well as the market’s overall risk tolerance and potential for future price volatility.

If a large concentration of open interest exists at a specific strike price, it may indicate a high level of market risk as many traders are betting on the asset reaching that price level. 

While open interest is not a definitive measurement of bull/bear market bias, it can be interpreted as a sign of increased demand for an asset driven by factors such as increased economic activity.

A reading of 0.7 on Spearman’s rank correlation between traditional equities and crypto means digital assets continue to move in tandem and are likely to be impacted by wider macroeconomic events in traditional markets.

The US Federal Reserve is expected to announce a softer rate hike of 25 basis points on Wednesday, down from previous hikes of 50 and 75 basis points. A number of tech companies with blockchain exposure, including Meta, Google, and Amazon, are also expected to release their quarterly results this week.


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