Bitcoin has made a strong recovery above $105,000 after a sharp dip to $98,000 earlier this week.
The cryptocurrency briefly surpassed $106,000 but has since settled at around $105,700, showing a 4% increase in the last 24 hours.
Despite this positive price action, rising Open Interest is raising concerns among investors.
The Role of Open Interest in Bitcoin’s Rally
Open Interest refers to the total number of active BTC-related positions on centralized derivatives exchanges.
A sharp increase in Open Interest suggests that more positions are being opened, potentially introducing higher leverage into the market, which could result in greater volatility.
CryptoQuant analyst Maartunn pointed out that the rapid rise in Open Interest during Bitcoin’s recent price recovery could signal a problematic trend.
The surge in Open Interest means that many investors are taking on more leverage, which increases the risk of mass liquidations and sudden market shifts.
What’s at Risk?
While Bitcoin’s price surge may seem promising, the overheated derivatives market could trigger violent liquidations if the price retracts, leading to a sharp pullback.
Historically, such conditions have been a precursor to market squeezes, which could reverse the rally in a matter of moments.
Investors are left wondering whether the rally can sustain itself despite these warning signs or if the leveraged positions will eventually cause the market to crash. The coming days will be crucial to determining the future trajectory of Bitcoin’s price.