Given the recent price action of Bitcoin, which many describe as quite dramatic, there has been a lot of activity in the market lately. While the spot market reacted quickly to this price rally, there were some interesting trends in the options market as well. However, the dramatic difference between the trends seen in the options market before and after the price increase produced some compelling contrasts in space.
So, a recent Ecoinometrics analysis of up to an 8% increase in the price of Bitcoin showed that the daily trading volume in the futures market remains very low, even as open interest climbed to 40,000 BTC. The same, in the words of the same one, was not “nothing amazing.”
However, looking at the shorter-term chart of daily volume and open interest, it was noticeable that daily volumes for Bitcoin futures peaked for the first time this month as BTC rallied. Daily trading volumes were $ 1.87 billion, while open interest as of July 21 was $ 1.28 billion. Moreover, daily volumes more than doubled from the previous day.
However, it is also worth noting that once the uptrend has stabilized, these numbers do too, with volume falling shortly after the OI stopped.
The aforementioned Ecoinometrics report also touched on the recent Commitment of Traders report, which highlights that the retailer crowd has “given up in a bull market.” It mentioned,
“All hope is gone, and some have even failed. As a result, the level of net positions is almost as low as during the crash in March 2020. “
Moreover, the decrease in the excitement in the options market was also singled out from Robinhood Markets, Inc. in the revised prospectus published earlier this week. According to the document, revenues will be lower in the third quarter of 2021 compared to the second quarter as a result of “a decrease in the level of trading activity from record highs of trading activity, especially in relation to cryptocurrencies, during the three months ended June 30. , 2021 “.
It is worth noting here that despite the 8% price increase on July 21 on the hourly chart, Bitcoin was unable to hold on to the $ 32K level. Bitcoin, traded at $ 31,798 at the time of publication, has already dropped significantly from a local high of $ 32.8 thousand, which corresponds to a drop in OI and futures volumes.
On the contrary, it was a good sign that Bitcoin Futures short-term liquidation surged, the highest since the beginning of this month. This could mean that fewer people expected prices to fall below $ 30,000. In addition, the rise in open interest in futures matched a slight increase in futures volume (across all exchanges), as shown in the chart below, before the corrections halted its uptrend somewhat.
While this short liquidation did indicate a slight change in sentiment, the spread between spot BTC and futures is not the same as it used to be, and we still have 3x more short contracts compared to early 2020.
Thus, the future of the futures market seems a bit dim, at least for now. However, watching the liquidation trend and put-call ratios in the coming week, as well as futures volumes, will better clarify the scenario.