Will It Pump or Dump?

Bitcoin sees price recovery alongside a surge in open interest, signaling heightened market activity and institutional participation.

After plunging to a multi-week low of under $59,000, market participants saw Bitcoin regain momentum and climb back to $63,000 over the weekend. The bullish trend continued into the business week, pushing Bitcoin’s price close to $68,000 on Tuesday.

Bitcoin stabilized above $68,000 by Friday despite a brief pullback to $67,000 during the midweek.

Open Interest Hits All-Time High

Alongside this price resurgence, Bitcoin’s open interest has surged to unprecedented levels. Data from CryptoQuant indicates that the open interest in Bitcoin has reached an all-time high of $20 billion. CryptoQuant CEO Ki Young Ju drew public attention to this development on Thursday.

#Bitcoin open interest hit an all-time high of $20 billion, and the price is 8% away from its ATH. pic.twitter.com/wDpA29o4K4

— Ki Young Ju (@ki_young_ju) October 17, 2024

Historically, open interest, which measures the number of open derivative contracts, has demonstrated a strong correlation with price movements, particularly during periods of sharp market shifts. The recent surge in open interest reflects a significant influx of liquidity and heightened interest in Bitcoin derivatives. 

This heightened activity suggests traders are increasingly willing to engage in leveraged positions, a development that could signal bullish sentiment while also introducing increased risk into the market.

Open Interest vs. Price Movements

The relationship between Bitcoin’s price and open interest has been well documented in Young Ju’s chart. During Bitcoin’s rally from late 2020 to mid-2021, when the price surged from $10,000 to nearly $60,000, open interest similarly rose, reaching around $15 billion. 

Conversely, during subsequent market corrections in 2021 and 2022, open interest dropped in tandem with price declines. The current increase in open interest is particularly significant because the price of Bitcoin remains only 8% away from its all-time high of $73,737.94, recorded in March 2024.

Meanwhile, as the chart shows, significant correction often follows during a peak in open interest. The current figure suggests the market may be overheated and due for a substantial retracement.

CME Futures Milestone

Institutional involvement has also played a key role in this market activity. Bitcoin’s Futures open interest on CME has reached an all-time high, driven by institutional investors building long positions.

According to Vetle Lunde, head of K33 Research, CME open interest reached a new notional peak of 172,430 BTC on Tuesday. Last week, there was an increase of 19,120 BTC, marking the most notable three-day growth since June 2023.