A bitcoin short squeeze for the ages as futures open interest collapses
Bitcoin's recent price surge to over $80,000 is largely attributed to a 'short squeeze' rather than new long-term buying interest. Data shows that futures open interest has collapsed to a five-month low as short sellers were forced to close their positions.
Why it matters
Understanding the mechanics of this rally helps investors distinguish between sustainable market growth and temporary volatility driven by derivatives liquidations.
This time, however, appears different, and it points to a painful truth for bulls – short covering, or closure of bearish bets, appears to have helped drive prices higher rather than fresh outright long positions.
That’s evident from futures open interest (OI), a metric tracking the total number of active futures contracts at a given time. As of this writing, the OI stands at around 587,584 BTC, the lowest in nearly five months and down from 645,760 BTC on Aug. 14, according to data source Glassnode. Measuring open interest in bitcoin terms provides a clearer picture of positioning because it removes the mechanical increase that bitcoin’s rising dollar price would otherwise cause.
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