Bitcoin Perpetual Open Interest Suggests Short Squeeze Led To Crash
24 Juni 2022 - 1:00AM
NEWSBTC
The Bitcoin crash of last week was a brutal one for the market. It
saw the digital asset lose its footing from where it had been
trending just below $30,000 to crash to the mid $17,000s before a
recovery had begun. With the new week, the market had started to
emerge into the green. But as bitcoin struggles to hold above
$20,000, the question remains what had triggered such a crash. A
Short Squeeze The bitcoin open interest in perps had been up over
the last couple of weeks. This has continued to be the case through
the market crash and the subsequent recovery. However, the open
interest levels, mainly the rise and falls, leading up to and
during the bitcoin crash have all of the makings of a short
squeeze. Related Reading | By The Numbers: The Worst Bitcoin
Bear Markets Ever On Wednesday, the open interest in bitcoin perps
had eventually peaked at a new all-time high of 335,000 BTC after a
week of unpredictable movements. This was when bitcoin had declined
below $21,000. As the price of the digital asset had begun its
recovery, the open interest in perps had quickly declined.
Movements like these are associated with a short squeeze, which was
the same in the case. One that preceded another crash during the
weekend. Open interest remains elevated | Source: Arcane Research
The same was the case over the weekend. The open interest in perps
had once again surged, to 325,000 BTC this time, after erratic
movement when the price declined to the mid $17,000s. Another
decline in the open interest has since been recorded as the price
of BTC has recovered, albeit slower this time around. Bitcoin Perps
Trading At A Discount Bitcoin perps are still trading at a discount
compared to the spot prices. This is no surprise given that the
bitcoin funding rates have stayed neutral to below neutral even
through the crash and the massive sell-offs. Additionally, there
has been nothing significant that has happened in regards to the
bitcoin perps through the crash and eventual recovery, Funding
rates below neutral | Source: Arcane Research Interestingly, the
funding rates have now remained below neutral with the price of BTC
struggling above $20,000. One place where funding rates have had
the most impact has been on Deribit. Since it is rumored to be
closely intertwined with Three Arrows Capital (3AC), the decline in
funding rates triggered insolvency fears and rumors tied to the
crash of 3AC. Related Reading | Bitcoin Miner Liquidations
Threaten Bitcoin’s Recovery However, it is important to note that
Deribit has assured the public that it remains financially healthy
even if the 3AC debts were forfeited. As the market has begun to
move on from last week’s crash, the funding rates have begun to
stabilize, although they remain slightly below neutral. BTC
declines to mid-$20,000s | Source: BTCUSD on TradingView.com
Featured image from CNN International, charts from Arcane Research
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