Volatility in the Bitcoin market is increasing, and the cryptocurrency has lost over 5% of its value since the beginning of the week. The majority of this decline is attributed to derivative traders and highly leveraged positions. Therefore, this drop can be considered healthy for the markets.
The crypto markets are again showing a downward trend today, and while analysts predict a correction, it seems that the pullback has been accelerated by derivative speculators. On December 12th, Adam Cochran from Cinneamhain Ventures provided more information about funding rates and open positions, and explained the summary of Bitcoin.
As of December 11th, the open interest in Bitcoin across all exchanges was approximately $12 billion. Open interest measures the notional value of BTC derivatives that have not yet been settled or reached maturity. Cochran indicated that this level could be the start of increased volatility if it moves in the wrong direction and also represents about 0.1% of the total market value.
It was observed that Binance has the largest individual share in this open interest and that funding rates were at high levels. Funding rates are periodic payments made to or from traders based on the difference between perpetual contract markets and spot prices. However, it was pointed out that the issue was related to degens who were paying very high funding rates.
Leverage volatilities in Bitcoin or Ethereum price movements can be identified if they are in the same category as altcoins. Cochran concluded that if there is not enough momentum in leverage volatility, a burst that could reverse the trend might occur. At the time the article was written, the price of BTC was at the level of $41,869. In late transactions on December 11th, it had recovered from the intraday low level to $40,321.