Bitcoin Market in Consolidation But OI on BitMEX says “Expect Fireworks to Start Soon”

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Bitcoin Eyeing $11800 After Intense Drop

As we saw earlier today, Bitcoin started by declining from $11349 to $11176, roughly 1.76%.
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Crypto market is seeing the reds, however, it is still standing strong with Bitcoin staying above $9,000 since last week.

Meanwhile in the world stock market, while the US market is recovering, China’s stocks were “downright ugly.” The People’s Bank of China is doing its best to stymie the selloff and inject billions of dollars in the market to prop up prices. But for now, it isn’t having much effect on the price.

“The full impact on the economy and on corporate profits cannot be known at this time. Speculators outside the mainland seem to be content erasing January’s gains. Closer to ground zero however, the fear is much stronger,” said Mati Greenspan, founder of Quantum Economics in his daily newsletter.

However, what’s happening in stocks isn’t having any effect on the crypto market. And the fact that “Crypto is neither acting like a safe haven in the face of the virus, nor is it selling off with the other risk assets. Rather, it remains completely uncorrelated,” it is one of the main advantages of the crypto asset class to a portfolio manager, said Greenspan and also what makes it “a great hedging tool.”

At the moment he said the crypto market is in consolidation which is a “very healthy” test of the new price levels to see if they are really sustainable.

“The longer we stay at these levels, and trade above the 200DMA and above relevant support levels, the less people will fear that the recent gains might be erased by a Bart,” Greenspan said.

Bitcoin Futures and Options Market

Bitcoin options market is meanwhile, seeing “explosion in interest,” from retail traders and institutional players. Over the last year, options market volume has increased steadily with Deribit continuing to rule the roost.

Last month, CME launched bitcoin options contracts to rival the products at Bakkt and LedgerX. Since its launch on Jan. 13, 2020, the CME has outpaced its competitors in intraday trading activity. Bakkt meanwhile is seeing a decrease in activity.

Bitcoin options trading volume, Source

When it comes to open interest in global bitcoin futures, it has seen an increase of 60% since the start of the year and crossed $4 billion.

On both OKEx and BitMEX it has gone above $1 billion. For the past several days, the OI on BitMEX has been hovering around $1 billion, which is relatively high.

In margin trading, OI is the total sum of long and short contracts open in the market. And Whenever OI has reached $1 billion on the crypto derivatives platform, the market tends to see extreme volatility.

This increment in OI typically happens after an extended rally which soon takes a drop but this time we have been sitting  on this level for quite some time.

“Current Bitmex Open Interest is $1.03B & 111k BTC. $1B OI has always been the barrier. I expect fireworks to start soon (cascading margin calls). I wouldn’t buy here unless we get a clean break above the previous resistance. Stay safe,” said trader CryptoSqueeze.

Moreover, “The XBTUSD swap just crossed $2 Trillion in total volume traded since it launched in 2016. I’ll drink to that!,” tweeted BitMEX CEO Arthur Hayes.

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