• Bitcoin futures open interest (OI) has seen a notable increase leading up to the FOMC meeting.
• This rebound in OI began in mid-January and is largely attributed to increased institutional interest in Bitcoin futures.
• On Jan 30, Bitcoin futures OI saw the biggest increase since the beginning of the year, indicating investors are gearing up for a significant market movement.
Background on Futures Open Interest
Futures open interest (OI) is the total number of open futures contracts for an asset held by market participants. Open interest on futures contracts for any given asset varies daily, representing the amount of cash flowing into the market. An increase in OI often confirms a prevalent trend in the market — rising OI during a bear market shows that downward price action will continue while an increase during a bull run indicates upward movement.
Recent Increase In Bitcoin Futures Open Interest
CryptoSlate’s analysis of Bitcoin’s futures open interest showed a notable increase in OI following the collapse of FTX which wiped out 40% of open contracts since mid-November. As of now, around 433,000 BTC are allocated into futures contracts — this represents a sharp decrease from November’s 666,000 BTC recorded before FTX’s collapse. The rebound was mainly driven by institutional investors with 20% coming from CME alone — largely inaccessible to retail traders and hence indicative of institutional involvement. Most recently, on January 30th Bitcoin’s future OI saw its biggest increase since 2021 so far thus pointing to investors gearing up for significant price movements ahead of FOMC meeting.
Impact Of Price Movements
The increasing open interest has already had an impact on price movements as evidenced by Bitcoin’s recent uptick in value over recent weeks. Historically volatility increases before and during Federal Reserve meetings causing prices to fluctuate heavily — predictions backed by data show that post-FOMC meetings have positive effects on prices with markets tending towards long term bullish trends after such events take place.
The growing open interest in Bitcoin futures indicates strong investor confidence that can be expected to spread across other crypto assets as well once markets become more active post FOMC meeting due to higher liquidity levels caused by greater investor activity pre-event and post event respectively . It remains yet unclear how exactly these events will affect crypto markets but it is safe to say that investor sentiment appears optimistic at this point which could cause prices to rally significantly following Fed announcements depending on their content and implications for global financial markets at large