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Bitcoin Perpetual Open Interest Suggests Short Squeeze Led To Crash

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The Bitcoin crash last week was brutal for the market. He saw the digital asset lose its footing from just below $30,000 and drop to the mid-$17,000 before a recovery began. With the new week, the market began to go into the green zone. But as bitcoin struggles to hold above $20,000, the question remains what caused such a crash.

Short squeeze

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Bitcoin open interest in criminals has grown over the past couple of weeks. This continued during the market crash and subsequent recovery. However, open interest levels, mostly the rise and fall leading to and during the Bitcoin crash, have all the makings of a short squeeze.

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On Wednesday, open interest in bitcoin criminals eventually hit a new all-time high of 335,000 BTC after a week of unpredictable moves. This was when bitcoin fell below $21,000. As the price of the digital asset began to recover, open interest in criminals quickly declined. Such movements are associated with a short contraction, as in the case. One that preceded another accident over the weekend.

Bitcoin open interest

Open interest remains elevated | Source: Arcane Research

The same thing happened on the weekend. Open interest in criminals rose again, this time to 325,000 BTC, after an unsustainable move as the price dropped to the mid-$17,000 range. Since then, another decline in open interest has been recorded as the price of BTC has rebounded, albeit more slowly this time.

Bitcoin criminals trade at a discount

Bitcoin criminals are still trading at a discount compared to spot prices. This is not surprising given that Bitcoin funding rates remained neutral to below neutral even during the crash and massive selloffs. Also, nothing significant has happened regarding bitcoin criminals due to the crash and eventual recovery.

Funding rates

Funding rates below neutral | Source: Arcane Research

Interestingly, funding rates currently remain below neutral, with BTC price hovering above $20,000. One of the places where funding rates had the biggest impact was Deribit. Because it is rumored to be closely linked to Three Arrows Capital (3AC), the cut in funding rates has raised insolvency fears and rumors related to 3AC’s collapse.

| Bitcoin Miner Liquidation Threatens Bitcoin Recovery

However, it is important to note that Deribit has assured the public that it will remain financially healthy even if 3AC’s debts are forfeited. As the market began to recover from last week’s crash, funding rates have begun to stabilize, although they remain just below the neutral level.

Bitcoin price chart from

BTC declines to mid-$20,000s | Source: BTCUSD on
Featured image from CNN International, charts from Arcane Research and

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