Crypto Exchange Open Interest Rises as Bitcoin Volatility Drops to New Low

Recent data from Skew shows that open interest for Bitcoin (BTC) has been rising on the Bybit crypto trading platform, reaching a new high at $434 million on July 14 for the Tether (USDT) and USD pairs combined.

BTC Futures – Bybit Open Interest. Source: Skew.com

Open interest for other cryptocurrencies like EOS, Ether (ETH) and XRP have also been rising at Bybit. Open interest is the value locked in a derivatives contract like a futures or option contract and it allows investors to gauge money flows into and out of these contracts.

Interestingly, Bybit seems to be going against the grain when it comes to aggregate open interest as the measurement for Bitcoin futures has been fairly still in the last month, much like the price of Bitcoin itself.

According to Ben Zhou, co-founder and CEO of Bybit, the increase in open interest could possibly be connected to growth in the number of users. Zhou told Cointelegraph:

“When there is market volatility, volume spikes. However, when more users enter the market, open interest would naturally increase. Recently, we have seen more users registering and I do believe that this is a clear indicator that a bullish market is upon us.”

BTC Futures – Aggregate Open Interest. Source: Skew.com

Bitcoin price continues to “hibernate”

The Bitcoin price has seen little action over the last month as spot markets and derivatives trading volume dropped to yearly lows in the month of June. In the meantime, several tokens in the DeFi space like Chainlink (LINK), Compound (COMP) and Aave (LEND) continue to outperform Bitcoin.

In fact, Skew data shows Bitcoin’s realized volatility has just reached a 3-year low, and its correlation with the stock market continues to be on the rise. The 1-year realized correlation for Bitcoin and the S&P 500 continues to rise day after day, currently sitting at 38.8%, according to Skew.

BTC – S&P 500 1-year realized correlation. Source: Skew.com

A lack of volatility in the Bitcoin price may seem like a sign of stagnation for the foreseeable future, or perhaps even a hint that a bearish trend is developing, but it’s too early to tell right now.

The current scenario mimics that of late 2018 when Bitcoin crashed to $3,100. However, other bullish signs may change the course of Bitcoin, especially as institutions become increasingly involved with cryptocurrency products.