Bitcoin open interest goes meteoric; traders now warn of a ‘whipsaw’

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Bitcoin’s (BTC) open interest (OI) surged over $2 billion in just three days, leading traders to believe it may trigger a sudden “whipsaw” effect on its price.

“Bitcoin’s [had] quite the run-up in Open Interest over the past 3 days,” pseudonymous crypto trader Daan Crypto Trades noted in a June 5 X post. Open Interest is the total number of derivative contracts, such as options or futures, that have not been settled — a rise could suggest more traders are speculating 

BitLab Academy director Kelly Kellam explained that the sudden spike in Bitcoin’s OI and the continuation of positive funding rates suggest “the likelihood” of whipsaw action on Bitcoin’s price — which is when there is a sudden price spike in the opposite direction of the current trend.

“The open interest ticking up as the positive premium persists (everyone going Leveraged Long) is a recipe for a small correction BTC health check,” he added.

Bitcoin’s OI jumped $2.02 billion over the three day period, reaching $36.92 billion on June 6, as per CoinGlass data.

Bitcoin Open Interest has increased significantly over the past three days. Source: CoinGlass

Open Interest is the total number of derivative contracts, such as options or futures, that have not been settled. 

A large amount of open interest can potentially increase price swings, particularly when traders hold multiple positions and decide to suddenly adjust their strategy.

It can also influence the overall sentiment of traders who use OI as a signal to decide whether to hold or sell their crypto assets.

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Bitcoin’s price is currently trading at $70,890, up 4.23% over the past seven days, according to CoinMarketCap data.

Bitcoin is up 10.42% over the past 30 days. Source: CoinMarketCap

Should Bitcoin’s price sharply retreat by 4% to $68,000, approximately $1.96 billion in long positions could be wiped — a possibility not to be overlooked, despite the overall sentiment in the market, according to pseudonymous crypto trader Jelle.

“While I’m confident Bitcoin enters price discovery soon, I’m pretty sure it won’t happen without some major volatility,” they added.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.