The several market indicators show that Bitcoin futures open interest is experiencing a 3-month high. Its current momentum suggests that Bitcoin might soon soar above $50K and turn bullish.
In the Deribit exchange, the total outstanding futures contracts hit $1.37 billion on Monday, which is the highest it has attained in three months. Data from Stack Funds suggest that the gap between Bitcoin spot rate and futures contract has been on the rise in the same three months.
According to the investment management firm, Bitcoin recovery suggests that investors are more willing to embrace bitcoin despite the risks. Its head of research, Lennard Neo, believes that Bitcoin futures indicate the market is headed for a bull-run. He added that the momentum versus the offers shows the market is well supported, and a consolidation will happen before it breaks at $50K.
Why the strong market position?
Back in June, the high sell-off in the largest cryptocurrency spot market led to the fall of Bitcoin futures. This pushed the price to $28,800 from $41, 322, which affected trade. To deal with the big price disparity between the spot market and futures, traders would buy Bitcoin in the spot market and sell their futures. Most traders would focus on their long-dated futures so that they don’t get a loss. This helped to bridge the gap between the spot and bitcoin futures, which, in turn, affected futures contracts.
We can confirm this by checking the trends on Deribit. During the three-month phase, the futures were trading at 2.5% instead of 5%- 15%, which is the premium.
Contrary to expectation, the drop in June was not caused by long liquidation but by the situation in China. The crackdown in China affected the whole crypto industry causing the price of Bitcoin to plunge. This pushed miners to exit and many bitcoin holders to sell off their assets.
Bitcoin recovery mode
August has been a great month for Bitcoin as mining has been less of a concern. This led many to start accumulating the asset. The high inflation rate in the US pushed many to cryptocurrencies, and Bitcoin is the king of it. That explains why Bitcoin is soaring higher. It spilled over to lead to high interest in futures open interest, showing both investors and traders are keen on the asset.