Bitcoin derivatives continue to soar as open interest (OI) in Bitcoin futures reached a record $40.5 billion on October 21, according to CoinGlass data.
CME Dominates Bitcoin Futures Market
The Chicago Mercantile Exchange (CME) holds the largest share of Bitcoin futures OI, representing 30.7% of the market. Binance follows closely with 20.4%, while Bybit claims 15%.
Bitcoin Approaches $70,000 as Open Interest Surges
The spike in open interest coincides with Bitcoin nearing the $70,000 mark. Open interest refers to the total value or number of active futures contracts that have not yet expired. It’s a key indicator of market activity and investor involvement in Bitcoin derivatives.
A rise in open interest may suggest increased leverage in the system, potentially triggering heightened market volatility. When OI is high, sudden price movements can lead to substantial market shifts.
The Impact of Cascading Liquidations
Periods of elevated open interest can cause cascading liquidations, forcing sales on the spot market, which may result in sudden Bitcoin price drops. A similar scenario occurred in August when Bitcoin lost nearly 20% of its value, plunging below $50,000 in two days.
As of October 21, Bitcoin briefly touched $69,380 before pulling back to $69,033. The cryptocurrency is now 6.4% below its all-time high of $73,738, according to CoinGecko.
Altcoins Outperform Bitcoin
Altcoins such as Ether and Solana have recently outpaced Bitcoin’s gains. Ether rose by 3.5%, reaching $2,750, while Solana gained 6%, nearing $170. Both assets have since slightly retraced from their recent highs.
U.S. Election Sparks Bitcoin Open Interest Surge
Bitcoin’s rise to a three-month high coincides with growing anticipation of the U.S. presidential election on November 5. Polls suggest a higher probability of former President Donald Trump winning the election, which has strengthened the U.S. dollar.
Trump’s proposed tariff and tax policies are expected to maintain higher U.S. interest rates, potentially weakening the currencies of America’s trading partners. His administration is perceived as more favorable toward cryptocurrency, which has further fueled Bitcoin’s rally.
Election Uncertainty Drives Market Attention
With no major economic events on the horizon, market focus has shifted to corporate earnings and the potential risks surrounding the U.S. election. Chris Weston, head of research at Pepperstone, noted that traders are contemplating intensifying election-related trades as the vote draws closer.
Weston suggested that hedging against Trump’s potential tariff policies could involve taking long positions in the dollar against currencies like the euro, Swiss franc, and Mexican peso. Similarly, Brad Bechtel, global head of FX at Jefferies, emphasized that rising U.S. interest rates are bolstering the dollar’s strength against those currencies.
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