Bitcoin futures and perpetual contracts, with values denoted in US dollars, have recently surged past the $21 billion mark, a peak unseen since November 2021. Despite the substantial open interest, the market’s leverage remains modest, diminishing the chances of significant price swings prompted by abrupt liquidations.
Bitcoin Derivatives See Surge in Investor Interest
Data from CoinGlass reveals that the dollar-represented open interest for Bitcoin futures contracts has ascended to an impressive $21.3 billion, marking the highest in over two years. With Bitcoin’s spot market price at $49,570, the 22% increase in open interest from the year’s start nears the $24 billion record of mid-November 2021 when Bitcoin’s price soared above $65,000.
The heightened interest in leveraged investment instruments like futures coincides with Bitcoin’s recent price uptick, signifying a robust injection of capital on the bullish side. The cryptocurrency has witnessed a notable 28% rise in value within three weeks, spurred by substantial inflows into new spot ETFs in the United States.
Market Leverage Remains Cautious
While high leverage can exacerbate gains and losses, the market’s current mild leverage suggests a lower risk of drastic liquidations that could trigger a market downturn. Liquidations, driven by insufficient margin in bullish or bearish positions, often result in sharp price movements.
Despite a minor uptick in the estimated leverage ratio from 0.18 to 0.20, as reported by CryptoQuant, it is still not at the heights seen last August. Furthermore, CoinGlass indicates that the quantity of Bitcoin-denominated futures contracts is at 430,500, notably less than the October 2022 peak of 660,000 contracts. Noelle Acheson, an authority in cryptocurrency markets, notes the leverage in the BTC futures market is climbing but has yet to reach “frothy levels.”