Open interest on Bitcoin at annual highs

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Open Interest (OI) on Bitcoin represents derivative contracts such as futures and options that have not yet closed at a specific time. 

In other words, it is the sum of all open long or short positions at a given instant.

As it sums both long (optimistic) and short (pessimistic) positions, it is not useful for trying to guess future price trends, but it is a good indicator of the volume of trading activity.

The Open Interest on Bitcoin

CoinGlass collects the OI on different platforms where derivatives are traded, and sums them together. 

Right now the total Open Interest on Bitcoin derivatives is reported to be over $14 billion. 

It is worth noting that the crypto exchange with the largest OI on Bitcoin is Binance, with a share well below 50% (32%), but almost double that of CME. 

The CME (Chicago Mercantile Exchange) is the world’s leading exchange for derivatives, but it only comes in at 18% of the entire Open Interest on Bitcoin despite this. 

What’s more, the third largest is the crypto exchange Bybit, with only a slightly smaller share. 

Thus, the $4.65 billion in OI on Bitcoin on Binance is a more than remarkable figure, even though it represents only 32% of the total. 

The rise of Open Interest on Bitcoin

It is worth noting that the OI on Bitcoin has risen significantly in recent weeks. 

In fact as of 18 March it had always been more or less above $10 billion, but as of 16 June it began to rise significantly. 

However, something like this had already happened between 5 and 14 April, but it had only gone up to 13 billion. 

Hence, the current level is the maximum level in 2023. 

To find the last time it had been above $14 billion it is necessary to go back to 9 May 2022, which was before the implosion of the Terra/Luna ecosystem. 

This means that from this point of view all the losses of the last year due to that very implosion have been recovered. 

The comparison with altcoins

The comparison with altcoins from this point of view is merciless. 

Only Ethereum holds up somewhat, with $5.77 billion in OI, which is not much more than the OI on Bitcoin on Binance alone. In fact, the OI on ETH on Binance is less than $2 billion, or less than half that on Bitcoin. 

Even in the case of Ethereum, ranked third is Bybit, with OKX in second place. 

CME is actually only sixth for OI on ETH, with only $0.36 billion. 

This probably means that traditional investors are much less likely to bet on altcoins than on Bitcoin. 

There is no other cryptocurrency with more than 1 billion in total OI, and indeed only XRP exceeds half a billion. 

Putting together the Open Interest of all altcoins, excluding Ethereum, they struggle to reach $4 billion, which is less than the Open Interest on ETH alone, and even less than the OI on Bitcoin alone on Binance. 

In other words, if Bitcoin’s dominance in the crypto markets in terms of market capitalization is around 50%, in the derivatives market in terms of Open Interest it is around 60%. And all this without the traditional exchanges playing a significant role. 

The volume trend

It is worth noting that the daily trading volumes of derivative contracts are just under three times the Open Interest, which is on higher levels than spot trades. 

Taking Binance as a reference, the daily trading volume of crypto derivatives turns out to be just under $40 billion, while that of spot trades on all cryptocurrencies turns out to be less than $9 billion. 

This means that at this time traders prefer to trade derivatives such as futures or options than spot cryptocurrencies. 

Generally, professional traders are the ones who prefer derivatives the most, while small retail investors prefer spot markets. This seems to indicate that right now it is mainly professional traders who are operating in this market. 

Then again, the retail people come in droves only when there is hype, often at the height of the speculative bubble, while the professionals tend to stay there all the time. 

Moreover, current volumes are by no means record-breaking, so much so that for example they are lower than those at the end of April. 

Long or short

Right now the long/short ratio is slightly skewed toward long positions. 

The difference is small, but it indicates that overall the markets seem to be slightly optimistic about the short term. 

It is important not to forget that derivative contracts can expire, so the long/short ratio can also change quite quickly. 

In essence, the crypto derivatives markets have fully recovered from the bear-market of 2022, so much so that they are showing slight signs of optimism. 

However, these are always very volatile markets that can change sentiment very quickly.