Analyzing the $7 Billion Drop in Bitcoin Notional Open Interest

Analyzing the $7 Billion Drop in Bitcoin Notional Open Interest

The Bitcoin notional open interest (OI) in BTC futures and perpetual futures is a key indicator of market sentiment which has declined by roughly 18%, dropping from $37 billion to $30.2 billion in just one month, the open interest in BTC terms has remained stable.

The Bitcoin Notional Open Interest

This decline has occurred alongside a 14% drop in Bitcoin’s spot market price, as reported by Coinglass. At first glance, the data might suggest that bullish leveraged bets, or longs, expecting a price increase, have been unwound over the past four weeks.

This would imply that BTC’s price drop is partly due to the closing of these bullish positions. However, this interpretation only tells part of the story and overlooks the underlying bullish sentiment in the market.

Open Interest Dynamics

Open interest represents the number of active or open contracts at any given time. Notional open interest, on the other hand, is calculated by multiplying the number of units in one contract by its current spot market price.

Consequently, fluctuations in asset prices impact notional open interest even if the total number of contracts remains unchanged, which can present a misleading view of market activity. This seems to be the case with BTC.

Despite the decline in notional OI, the actual open interest in BTC has held steady above the 500,000 BTC mark over the past four weeks. Additionally, perpetual funding rates—fees exchanges charge every eight hours have consistently remained positive, indicating a prevailing bias towards bullish bets.

Market Sentiment and Strategies

The combination of stable open interest in BTC terms and positive funding rates, despite a drop in notional OI, suggests that some traders are opening new long positions, offsetting others who are closing their bullish bets.

According to Laurent Kssis, a crypto ETF specialist at CEC Capital, this indicates that traders are not hesitating to place long orders. He also notes that many traders are implementing protective strategies due to the market’s uncertainty.

Traders may be optimistic that once the selling pressure from Mt. Gox reimbursements and miners subsides, Bitcoin could resume its upward trend, keeping pace with the Nasdaq. This is further supported by the consistent positive spread between futures and spot prices, known as the basis.

Spot and Options Market Insights

Activity in the spot and options markets also points to a bullish bias. Griffin Ardern, head of options trading and research at BloFin, notes that Bitfinex has been a source of bullish pressure during the price dip, with whales buying the dips since late June. This activity has not been mirrored in other derivatives markets.


To conclude, despite the decline in Bitcoin Notional Open Interest, the current market dynamics, positive funding rates, and strategic long positions, indicate a resilient bullish sentiment. Traders appear to be positioning themselves for potential upward movement in Bitcoin’s price, anticipating that macroeconomic factors and reduced selling pressure will drive a future rally.

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