Bitcoin traders in the perpetual futures market are exercising caution, unwilling to take on high leverage, according to data tracked by Glassnode and Blockware Solutions.
The open interest in the BTC perpetual futures as a percentage of bitcoin's market cap has been locked between 1.5% and 1.7% in the last four weeks, well below the 2.6% high of September last year.
"Open interest/market cap ratio remains relatively low, which means that spot will likely keep driving the price higher in the short to medium term as supply continues to slowly contract into the hands of long-term holders," analysts at Blockware Solutions said in a newsletter on Friday.
Open interest refers to the dollar value locked in the number of active contracts. Leverage allows traders to open positions worth more than the money or coins deposited as a margin at the exchange and can magnify both profits and losses as well as exposing traders to liquidations. The higher the degree of leverage, the greater the probability that liquidations inject volatility into the market.
Disclaimer: This article was written and edited by CoinDesk journalists with the sole purpose of informing the reader with accurate information. If you click on a link from Glassnode, CoinDesk may earn a commission. For more, see our Ethics Policy.
EmoticonEmoticon