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Bitcoin ‘Open Interest’ Hits $20BN First time Since 2021 — Can BTC Price Reach $50,000?

By:
Ibrahim Ajibade
Updated: Dec 6, 2023, 12:30 UTC

On-chain analysis of Bitcoin capital flows explores BTC Open Interest hitting $20 billion could push the spot price above $50,000 in the weeks ahead. 

Bitcoin Price

In this article:

Insight:

  • Bitcoin (BTC) price crossed the $43,500 mark on Tuesday as the positive sentiment surrounding the pioneer cryptocurrency intensified. 
  • Bitcoin capital stock in the Derivatives markets has crossed the $19 billion market for the first time since December 2021. 
  • As futures traders increase their bets, technical indicators highlight a key resistance zone that could form a major stumbling block. 

Bitcoin’s (BTC) price briefly broke above the $43,500 territory on Tuesday, Dec 5 sparking bullish trading activity in the derivative markets. On-chain analysis of Bitcoin capital flows explores how the rising BTC Open Interest could push the spot price above $50,000 in the weeks ahead. 

Bitcoin Open Interest Eyes $20 Billion Mark First Time in 2 Years.

Bitcoin price hit yet another yearly peak as it traded above the $43,500 area at press time on Tuesday, Dec 5.

BTC price is now up, 16% in the first 5 days of December alone. But interestingly, recent capital flows in the Bitcoin derivative markets suggest the price rally is far from over. 

According to Coinglass, BTC Open Interest jumped about 17% between December 1 and December 5. As depicted below, it has increased from an opening balance of $16.89 million to hit $19.64 billion during this eventful 5-day period. This is the first time since December 2021, that Bitcoin Open Interest has encroached the $20 billion area. 

Bitcoin (BTC) Open Interest |  Source – Open Interest 
Bitcoin (BTC) Open Interest |  Source – Open Interest 

Open Interest quantifies the total capital invested in active derivatives contracts for a specific cryptocurrency. Notably, while there has been a 17% increase in open interest, the BTC price has only risen by 16% between Dec 1 and Dec 5.

Typically,  it is a bullish signal when the percentage increase Open Interest outpaces the increase in spot prices as observed above. 

Firstly, rising Open Interest indicates that more investors are bringing capital into the markets than those closing out their positions.

But most importantly, when Open Interest growth outpaces price increase, as observed above, it is often an strong indication that the current Bitcoin spot prices maybe undervalued. 

These two factors could combine to drive Bitcoin price towards the $50,000 area in the weeks ahead. 

Bitcoin Price Forecast: $47,000 is the Next Major Resistance to Watch 

Having broken above the $43,500 territory, the 17% increase in capital inflows recorded in the first 5 days of December puts BTC price on an upward trajectory.

From an on-chain standpoint, Bitcoin price looks set to generate momentum for another significant leg-up. 

However, for the bulls to validate the $50,000 BTC price prediction, they must first breakdown the next significant resistance level around $47,000.

The Global In/Out of the Money (GIOM) data, which groups the current Bitcoin holders according to their entry prices.

It shows that 559,910 million current holders had bought 421,800 BTC around the $46,780 area.

Having held at a loss for almost 2-years, these investors could now be tempted to book profits some profits, once Bitcoin price approaches their break-even point again. 

But if BTC bullish momentum is strong enough to scale that $46,780 resisitance zone, it could effectively catapult BTC price above $50,000.

Bitcoin (BTC) Price Forecast | GIOM data | Source: IntoTheBlock
Bitcoin (BTC) Price Forecast | GIOM data | Source: IntoTheBlock

On the downside, the bears could invalidate that positive prediction if BTC price dips below $40,000. But, in that case, the 800,670 holders that bought 366,990 BTC at the average price of $41,500 could offer significant support. 

If those investors HODL firmly, its is unlikely that Bitcoin price will drop below $40,000 in the days ahead. 

However, considering the high risk behavior displayed by the Futures traders, a reversal toward $0.07 could trigger massive liquidations. If this happens, a long squeeze could send DOGE price spiraling toward $0.06.

About the Author

Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.

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