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Bitcoin futures open interest surges by 130% in 2021, while gold’s drop 17%

Bitcoin futures open interest surges by 130% in 2021, while gold's drop 17%

The surging price of bitcoin from the start of the year has resulted in massive growth in open interest for the asset’s futures as traders seek to hedge their positions on various exchanges. 

Data calculated by Finbold indicates that bitcoin futures open interest have grown by 133.74% between January and March 2021. During the first week of January 2021, the open interest was valued at $9.66 billion, while as of March 30, 2021, the figure was $22.58 billion reflecting the asset’s sustained bull run in the first three months of the year. 

The data on bitcoin futures open interest is from eleven major global BTC futures exchanges, including Binance, Bybit, Okex, CME, Huobi, FTX, Deribit, Bitmex, Bitfinex, Phemex, and Kraken.

Elsewhere, gold futures open interest has plunged between the same period by 17.54%, from $116.30 billion to $95.90 billion. Gold futures exchanges data is by the nine major global gold futures exchanges, including Comex, Dubai, ICE, India, Istanbul, Moscow, SFE, Tocom, LME.

Open interest for the two assets refers to the total number of outstanding derivative contracts, such as options or futures that have not been settled. Open interest is used as an indicator determining market sentiment and the strength behind price trends.

Bitcoin rally results in open interest future growth

As highlighted, the spike in bitcoin futures open interest follows the asset’s price rally, resulting in a new all-time high of above $61,000 as of March 14. The growth in bitcoin’s value has been motivated by institutional investors increasingly taking part in the digital currency sector

For example, the new record price was initiated after electric vehicle manufacturer Tesla (NASDAQ: TSLA) revealed that it had invested $1.5 billion in bitcoin. Additionally, after online payment platforms Visa (NYSE: V) and PayPal (NASDAQ: PYPL) announced support for cryptocurrencies, bitcoin’s value surged further. More institutions are expected to invest in the asset and potentially drive it towards mainstream adoption. 

The growth in open interest might also indicate institutions from traditional finance are considering adding more bitcoin exposure to their portfolios. As institutional investors continue hedging using futures, the demand for leverage increases. 

The value of bitcoin open interest futures shows the size of longs and shorts, and with the number increasing, it means investors have larger risk exposure. In general, it highlights the increasing interest in bitcoin despite experiencing minor sell-offs during the three months period. 

Gold’s price sell-offs impact open interest futures

Elsewhere, the open gold futures have plunged in the first three months of 2021, correlating with the precious metal’s price fluctuations. The decreasing open interest in gold suggests that the buying power is drying up, and thus at least a corrective downswing is to be expected. 

Since hitting an all-time high of above $2,000 in August 2020, gold has experienced several sell-offs while bitcoin remains resilient. Since January, the value of gold has plunged by almost 9%. The high value of gold’s open futures, however, is an indicator that some investors still have confidence in the metal to hit new heights. 

The growth in bitcoin open futures offers more reasons for cryptocurrency proponents to believe the asset will eventually replace gold as the ideal store of value. However, despite the digital asset surging, it is still miles away from gold in terms of the value of the open interest futures. 

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