Bitcoin breaks $21,000 as open interest sinks, spot volumes rise

Bitcoin has crossed $21,000 after weeks of failing to break stiff resistance. A few hours above $21,000 has given the market some much-needed confidence with a slight correction.

It’s difficult to estimate how long the correction will last, but exchange data suggests BTC is facing a healthier market now, which could lead to another surge soon.

Data analyzed by CryptoSlate shows that both the number and volume of futures contracts have dropped significantly since the end of October. Spot trading volumes on exchanges are trending upwards, indicating that buying pressure from retailers is returning.

Bitcoin’s spot-to-futures volume ratio reached a year-to-date high after a slight correction in mid-October, continuing the upward trend that began in July.

Bitcoin spot to futures volume
A graph showing the ratio of bitcoin spot to futures volume in 2022 (Source: The Block)

A closer look at Bitcoin derivatives reveals that the market is much less volatile. The Estimated Leverage Ratio (ELR) for Bitcoin futures is the ratio of open interest divided by the exchange’s reserves. Open Interest is the total number of derivative contracts outstanding.of Bitcoin ELR indicates the average leverage used by derivatives traders and has historically been a robust indicator of market volatility. The higher the ratio, the greater the liquidation risk for derivatives traders.

After reaching a record high of 0.34 in October, the ESL has fallen sharply and is now at 0.30.

bitcoin price esl
Graph showing Bitcoin Futures Estimated Leverage Ratio (ESL) in 2022 (Source: Glassnode)

Stability caused by risk aversion in derivatives markets could create a new resistance point for BTC at $21,000. surpassed the dollar.

bitcoin realization price
A graph showing the price of Bitcoin in 2022 (Source: Glassnode)

Bitcoin’s realized price is a useful metric as it shows the realized market capitalization divided by the current supply (i.e. the average price at which all Bitcoins in circulation were purchased). Solid support is likely to form when BTC’s spot price rises above its realized price.

Posted In: Bitcoin, Price Watch

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