The dollar-value locked-in open futures and perpetual futures contracts for Bitcoin (
BTC) have recently crossed $21 billion, marking the highest value since November 2021. Despite the surge in notional open interest, the overall leverage in the market remains low, indicating that the chances of sudden liquidations-induced price volatility are also low.According to CoinGlass, the notional open interest, which refers to the dollar value locked in the number of open or active Bitcoin (
BTC) futures contracts, has reached a 26-month high. As of now, the open interest in perpetuals and standard futures has crossed $21 billion, with Bitcoin trading at $51,831 in the spot market. The open interest has surged 22% this year and is nearing the record of $24 billion seen in mid-November 2021 when Bitcoin traded above $65,000.The renewed interest in leveraged products like futures, coupled with a price rise, confirms the uptrend and represents an influx of new money on the bullish side. Bitcoin (
BTC) has rallied 29% in just over three weeks, mainly due to strong inflows into the recently launched spot ETFs in the US.However, leverage magnifies both profits and losses, so a notable rise in futures open interest is often seen as a warning of price volatility. The overall leverage in the market is still low, indicating a low probability of sudden long (buy positions) liquidations leading to a price crash. Liquidation refers to the forced closure of bullish long or bearish short positions by exchanges due to a margin shortage, and mass liquidations are known to inject bullish/bearish volatility into the market.
Bitcoin's (
BTC) estimated leverage ratio has recently ticked slightly higher from 0.18 to 0.20, but it is nowhere near the levels seen in August last year, as per data from CryptoQuant. Additionally, at 430,500, futures open interest in BTC terms still remains well below the peak of 660,000 reached in October 2022, according to CoinGlass.Noelle Acheson, the author of the popular Crypto is Macro Now newsletter, confidently stated in Tuesday's edition, "The leverage build-up is still relatively low, judging by the
BTC futures open interest in BTC terms (to remove the price effect) – it’s climbing fast, but it’s not at frothy levels yet."
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