Bitcoin’s $3 Billion Open Interest Under Threat, Putting Price at Risk

• Over $3 billion in options and futures sits above the $118k strike, implying big exposure and potential liquidation risk if Bitcoin falls
• Open interest in Bitcoin futures has surged to around $57.4 billion
• Funding rates are historically low, about 10% annualized compared to 80% in 2023

Daan Crypto highlights that over $3 billion in options and futures sits above the $118k strike, which can imply big exposure and potential liquidation risk if Bitcoin falls.

Many of these positions are likely longs, meaning a pullback could trigger liquidations as price dips below key levels.

Open interest in Bitcoin futures has surged to around $57.4 billion, pointing to heavy involvement from institutional investors rather than speculative retail. Just this month alone, approximately $3.4 billion flowed into Bitcoin ETFs, including a record $2.2 billion over two days. This is further evidence of institutional confidence.

On the other hand, funding rates are historically low (about 10% annualized compared to 80% in 2023), pointing to less leveraged, more sustainable positions. 

Also, the leverage ratio (futures versus exchange balances) has dropped as well, from 0.32 to 0.25, meaning traders rely more on capital than borrowed money.

There are some prominent whale movements too, where large holders have recently moved roughly $900 million worth of BTC (around 8,600 BTC). These movements were often directed to cold storage or over-the-counter desks, indicating ongoing portfolio adjustments.

Notably, whales with more than 1,000 BTC have shifted into an accumulation phase, effectively soaking up available supply as smaller holders opt to sell.

Institutional versus retail dynamics

Institutional accumulation appears to be the dominant trend over speculative bubbles in the current Bitcoin dynamics between institutional and retail players. However, the mentioned open interest above $118k creates a rather risky situation, as a price downturn could trigger widespread liquidations.

Interestingly, according to the data from Google Trends, despite Bitcoin hovering near all-time highs, public interest (Google searches) remains modest at best, which could hint that this rally is being driven by deeper-market investors and not retail hype.

Still, strong ETF inflows and rising derivatives interest could propel Bitcoin’s price forward by a good margin. Then again, a drop below the $118k open interest heavy zone might trigger liquidations, introducing volatility despite the seemingly stable base.

In the end, the incredibly high amount of money being bet on Bitcoin’s future price tells us that serious institutions are getting deeply involved, but this also means there’s a risk of big price drops if the cryptocurrency falls below important price points.