Bitcoin Futures Open Interest Hits $80 Billion Amid 30% May Surge

Bitcoin futures open interest (OI) has reached unprecedented levels on crypto derivatives exchanges, as traders anticipate further price increases and new all-time highs. On May 23, Bitcoin (BTC) futures open interest peaked at just over $80 billion, marking a 30% increase since the start of May. This surge indicates that derivatives speculators are leveraging their positions in anticipation of higher Bitcoin prices. Open interest represents the total number of outstanding futures contracts that have not been settled or closed, providing a measure of the current market speculation.

When open interest surges, it signals that a significant number of traders are holding large, leveraged positions. If Bitcoin's price moves against these over-leveraged positions, traders may face forced liquidations, leading to selling pressure and potential price drops. However, analysts suggest that the recent surge in spot Bitcoin exchange-traded fund (ETF) inflows, which have seen more than $2.5 billion this week, could offset some of this extended leverage.

Bitcoin options markets also show a similar pattern, with open interest exceeding $1.5 billion at the $110,000 and $120,000 strike prices on the Deribit exchange. Additionally, there is more than $1 billion in open interest at strike prices of $115,000, $125,000, and $130,000. Around $2.76 billion worth of notional value contracts are set to expire on May 23, with a put/call ratio of 1.2%, indicating more short (put) sellers than longs (call). The max pain point, where most losses will be made on expiry, is at $103,000, according to Deribit.

Despite the record high in open interest, Bitcoin's price has slightly lost its recent gains and briefly slipped below $111,000. The asset has gained almost 20% since the beginning of the year and almost 50% since its crash to $75,000 on April 7. Bitcoin hit an all-time high of $112,000 on May 22 and had mostly traded just above $111,000 over the last 24 hours, but slipped below the level at 4:15 am UTC on May 23.

This price movement suggests a degree of caution or profit-taking among investors, despite the record high in open interest. The dynamic nature of the crypto market, where rapid price changes and high levels of speculation are common, is evident in this scenario. The record high in open interest also highlights the increasing institutional involvement in the Bitcoin market, as more investors seek to capitalize on the cryptocurrency's price movements. However, the subsequent slip in Bitcoin's price below $111,000 indicates that the market may be experiencing some volatility or uncertainty, as investors reassess their positions and strategies.