The 14-day Bitcoin Open Interest RSI has been rising lately
As one analyst pointed out in a CryptoQuant post, a short-term bearish correction for BTC could happen soon. “Open Interest” is an indicator that measures the total amount of bitcoin futures contracts currently open on derivatives exchanges. The metric considers both long and short contracts.
When the value of this metric increases, it means that investors are currently opening more contracts on derivatives exchanges. Such a trend could lead to higher volatility in the crypto price as it implies that leverage in the market is increasing.
On the other hand, declining values indicate that holders are being liquidated or are currently closing their futures contracts. Of course, this could lead to a more stable price of BTC due to the lower leverage.
Well, the relevant metric in the context of the current discussion is not the open interest itself, but its 14-day RSI. The Relative Strength index (RSI) is a momentum oscillator that tracks the speed and direction of changes in the value of any metric over time. The chart below shows the trend of Bitcoin’s 14-day open interest RSI over the past year:
The value of the metric seems to have increased a bit in the last few days | Source: CryptoQuant
As you can see in the chart above, the quant has highlighted the relevant regions of the trend for the Bitcoin Open Interest RSI (14). It seems that whenever the RSI has risen while BTC price has been moving sideways or down, a bearish divergence has formed for the crypto and its price has undergone a correction.
There have been other instances of the open interest RSI rising over the past year, but all of these have been accompanied by a rise in the price itself (rather than a consolidation or decline), so the same pattern never applied to them. However, lately the metric has risen again and this time the price has moved sideways at the same time, which means the bearish divergence is now forming like in these previous cases.
If the trend from the previous events is actually repeated this time, Bitcoin could soon experience another short-term course correction.
At the time of writing, the price of Bitcoin is hovering around $16,800, up 1% over the past week.
It looks like the value of the crypto has seen some bullish momentum over the past few days | Source: BTCUSD on TradingView Featured image by Becca on Unsplash.com, charts by TradingView.com, CryptoQuant.com
Source: Crypto News Deutsch