Bitcoin Open Interest Falls Even as Funding Rates Rise, Raising Risk of Long Liquidations
Summary
- Bitcoin open interest is declining, but concentration in long positions is strengthening again, according to the analysis.
- Funding rates have climbed quickly to 0.00906%, pushing up the short-term cost of maintaining long positions.
- The market is not yet overheated, but if funding rates and open interest rise together, the risk of a long squeeze could increase sharply.
Forecast Trend Report by Period
Leverage in Bitcoin’s derivatives market is easing, but the market is again becoming more skewed toward long positions, according to on-chain analyst Axel Adler Jr.
In a newsletter published on Aug. 31, Adler wrote that Bitcoin open interest, or OI, has yet to recover to its previous level after the short squeeze. Overall positioning continues to decline, while the cost of keeping long positions is rising quickly.
Bitcoin open interest fell about 3.8% to 318,600 BTC on Aug. 31 from 331,100 BTC on Aug. 21. It also dropped by 2,850 BTC over the past 24 hours, indicating the derivatives market remains in a deleveraging phase.
Funding rates, meanwhile, have risen quickly since Friday. The current funding rate stands at 0.00906%, while the eight-hour average is 0.00821% and the 24-hour average is 0.00725%.
The eight-hour average is about 13% higher than the 24-hour average, suggesting long positioning is becoming more concentrated in the short term.
The market is not yet overheated, Adler wrote, but it is becoming increasingly sensitive to downside moves. He added that if open interest starts rising again while funding rates continue to climb, long leverage would be rebuilt quickly. In that case, the risk of a long squeeze could increase sharply if prices fall.
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.