Bitcoin’s recent rebound has been accompanied by a sharp increase in open interest in the futures market.
This development mirrors patterns seen in previous bullish phases. As shown in Chart 1, when open interest previously broke above its former peak (red line), Bitcoin’s price surged shortly afterward (highlighted with the yellow arrow and green circle).
While the current open interest level hasn’t yet broken its previous high, the steep upward slope suggests it may soon do so. If that happens, there’s a strong likelihood that Bitcoin’s price will follow and break its own previous peak.
That said, excessive open interest can lead to an over-leveraged market, increasing the risk of liquidation events. However, for now, funding rates remain stable. The overall funding rate across futures exchanges indicates a slight long bias without overheating (Chart 2), and Binance—the largest exchange—actually shows a short position dominance (Chart 3), suggesting healthy market equilibrium.
In light of this, the current increase in open interest appears to be a sign of a healthy long build-up, rather than a warning signal of impending volatility.
Written by Avocado_onchain
