21 Dec 2021

Open interest in BTC perpetuals is growing in a neutral funding environment

Leverage is once again picking up in the perpetual swaps, evident by the growing open interest in the bitcoin perpetuals.
Source: Glassnode, Skew
The open interest in the bitcoin perpetuals has grown from 186,000 BTC on Dec 5th to 226,000 BTC on Dec 20th, as leverage once again is picking up in the market. Binance’s USDT margined perpetual have seen the sharpest OI growth in the last weeks, with the instrument seeing its OI growing from 40,000 BTC to 62,000 BTC since Dec 5th. The OI growth on Binance has been accompanied by neutral to slightly below neutral funding rates, indicating that the market is less exposed to brutal long squeezes analogous to what we saw on Dec 4th. Growing open interest in the stablecoin margined BTC perpetual caused havoc for shorts in late July, as underwater shorts were liquidated during a memorable short squeeze. A similar squeeze is not out of the picture now. However, back in July, we had seen prolonged negative funding rates on Binance for well over a month. The funding rates in recent weeks indicate that short traders have been slightly more aggressive than long traders, but we are still very far from the aggressive shorting seen this summer.
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