Are Bitcoin Derivatives Behind The Latest Rally? Glassnode Answers
October 25 2023 - 3:00PM
NEWSBTC
Since the latest Bitcoin rally started, there has been speculation
going on as to whether derivatives fuel the surge. Here’s what
Glassnode says. Bitcoin Funding Rates Have Remained Cool Recently
In its latest weekly report, the on-chain analytics firm Glassnode
has talked about what the derivatives side of the market has looked
like while the latest rally in the asset has occurred. First, the
report has looked into the open interest of the perpetual swap
markets, where “open interest” refers to the total amount of
Bitcoin contracts currently open. The metric has been measured in
terms of BTC here so that the USD price fluctuations don’t affect
the trend. Looks like the value of the metric has plunged in recent
days | Source: Glassnode's The Week Onchain - Week 43, 2023 From
the chart, it’s visible that the Bitcoin open interest saw two
large liquidation squeezes back in January and August, with the
former one being a short squeeze and the latter one being a long
squeeze. Related Reading: Will Ethereum Rally Continue? These Could
Be The Factors To Watch Since the latest rally started, BTC has
observed two liquidation events: one of 25,000 BTC and the other of
33,000 BTC. This combined short squeeze is now of the same scale as
the aforementioned mass liquidation events. In terms of the USD
values of the liquidation events, the latest squeeze is again
comparable with the other ones this year: A large amount of short
liquidations seem to have occurred recently | Source: Glassnode's
The Week Onchain - Week 43, 2023 On the topic of liquidations,
Glassnode reveals that, interestingly, the market has been
dominated by long liquidations throughout the history of Bitcoin.
There have only been a few phases where shorts have dominated the
longs over 30 days. The latest large short liquidations have
resulted in the shorts just overtaking the longs, as the chart
below shows. Short liquidations have surpassed long liquidations |
Source: Glassnode's The Week Onchain - Week 43, 2023 Curiously, it
would appear that during the few periods that the short
liquidations have dominated the market (highlighted in yellow),
Bitcoin has observed a point of extreme in its price. While the
liquidation data would suggest that the derivatives have indeed
played a role in driving the market through this latest rally, the
funding rates could tell a different story. The funding rates have
been positive recently | Source: Glassnode's The Week Onchain -
Week 43, 2023 “Of note is that funding rates and cash-and-carry
basis in futures markets have remained relatively calm all things
considered,” explains Glassnode. “2023 has generally seen futures
markets yield annualized rates over 6%, which are greater than US
treasury rates.” Related Reading: Bitcoin Long-Term Holders Stay
Resolute Despite Rally, Supply Hits New ATH Back in August,
however, the selloff cooled off these funding rates, and they have
since remained relatively low. Even with the latest chaos in the
market, the metric still hasn’t seen any significant uptick. The
analytics firm notes that this could imply the Bitcoin rally is
only partially driven by leveraged speculation. BTC Price At the
time of writing, Bitcoin is trading at around $34,300, up 23% in
the past week. BTC has observed some sharp bullish momentum in the
past few days | Source: BTCUSD on TradingView Featured image from
Kanchanara on Unsplash.com, charts from TradingView.com,
Glassnode.com
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