Solana, Chainlink Among Coins With Overheating Open Interest: Data
20 Februar 2024 - 4:00PM
NEWSBTC
Data shows Solana and Chainlink are among the top cryptocurrencies
that have observed growth in Open Interest to relatively high
levels. Solana & Chainlink Have Their Open Interest At Notable
Values Currently According to data from the on-chain analytics firm
Santiment, there has been a dramatic increase in interest in the
derivative market for cryptocurrencies recently. The indicator of
relevance here is the “Open Interest,” which keeps track of the
total amount of derivative contracts for any given asset that is
currently open on all centralized exchanges. Related Reading:
Ethereum Breaks $2,900, But Watch Out For Futures Overheating When
the value of this metric goes up, it means that the investors are
increasing positions on the derivative side of the market. Such a
trend may be a predictor for higher volatility, as the total
leverage in the sector tends to go up when new futures positions
pop up. On the other hand, a decrease in the indicator implies the
holders are closing up their positions or are getting forcefully
liquidated by their platform, thus leading to the leverage
potentially coming down. As such, this kind of trend can result in
the asset’s price becoming more stable. Now, here is a chart that
shows the trend in the Open Interest for various top assets in the
cryptocurrency sector over the past year: Looks like the value of
the metric has been sharply going up for some of these assets |
Source: Santiment on X As displayed in the above graph, the Open
Interest has exploded for Bitcoin and Ethereum recently as the
latest surge in prices has occurred. Generally, such sharp price
action attracts a large amount of speculators to the assets, so the
indicator’s upward trajectory isn’t surprising. The scale of the
increase, though, may be a bit concerning. From the chart, it’s
visible that the BTC Open Interest is currently around $9.85
billion, while for ETH, it’s about $5.59 billion. Among the
altcoins, Solana and Chainlink have particularly stood out, as the
indicator has touched $1.62 billion and $549 million for them,
respectively. These are much smaller values than Bitcoin and
Ethereum, of course, but their market caps are also much smaller
than these two titans. “With Bitcoin, in particular, crossing over
$10B in open interest for the first time since July, 2022, this
does signal crowd euphoria is alive and well,” notes the analytics
firm. “Sometimes rising too quickly can be indicative of some
caution flags.” Related Reading: 16,000 Bitcoin Dormant Since 5+
Years Suddenly Moves, What’s Going On? The reason that a high Open
Interest has historically been a cause for concern is that mass
liquidation events become more probable to occur in such market
conditions, due to an abundance of leverage. Such events, where
liquidations can cascade together, are usually chaotic and result
in some sharp price action. As Solana, Chainlink, and other top
assets have a potentially overheated Open Interest right now, they
may be ones to watch in the coming days, as any further increases
might serve as a warning. SOL Price At the time of writing, Solana
is trading around the $110 level, down over 3% in the last seven
days. The price of Solana appears to have been moving sideways
recently | Source: SOLUSD on TradingView Featured image from
iStock.com, charts from TradingView.com, Santiment.net
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