Bitcoin ($BTC) market has recently gone through a huge spike in open interest. As per the data from the CryptoQuant, Bitcoin’s open interest has recently reached considerable height, signifying that a huge wave of volatility is approaching. At the moment, BTC is trading $81,669 after visiting $79k mark last night.

Bitcoin Experiences Heightened Open Interest, Triggering Speculation about Imminent Volatility

The analyst thinks that abruptly rising open interest in Bitcoin ($BTC) is raising speculation about its impact on the market. Hence, the respective development could pave the way for a notable rise in volatility in the near term. The market discloses that Bitcoin’s open interest has reportedly increased from the $24.3B mark to $26.7B. This indicates a substantial 9.9% surge within just a few hours.

In line with the data, the open interest serves as a key metric that displays the cumulative value of the remarkable derivative contracts. Open interest often deals with an expansion in the leveraged positions. This development normally denotes a precursor to increased market volatility. Hence, the current heightened open interest could also result in a volatility spike.

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Based on the historical market patterns, rough open interest jumps without subsequent growth in spot buying or trading volume usually highlight an over-leveraged market. This condition typically takes place before abrupt price movements amid the liquidation of the overextended positions. Thus, the price of Bitcoin is being led on the hands of leveraged positions. This indicates escalated risk within the market. Such a situation could ultimately deliver a good shorting opportunity if it is cautiously managed.

Historically, Leverage-Led Rallies Result in Sharp Corrections

According to the CryptoQuant, the pattern of surging open interest has been repeatedly occurring between mid-March and April. In these instances, the open interest rose before or parallel to Bitcoin’s price increases, followed by significant corrections. This reinforces the potential unsustainability of the leverage-led price rallies. Hence, the traders need to stay vigilant to deal with the massive volatility in the near term.