Bitcoin Rises to $86,500 as Risks Grow for Those Betting on Further Gains
As Bitcoin rises to $86,500, the increase in futures positions and funding costs shows that investors betting on further gains are taking on more risk if prices reverse.
According to CoinDesk’s analysis based on CoinGlass data, activity in Bitcoin’s derivatives market increased ahead of the U.S. jobs report. As the price climbed from about $83,500 to $86,500 since September 30, open interest, which represents outstanding futures contracts, also recovered.
Open interest rose by 27,000 BTC in two days
Total open interest denominated in Bitcoin rose from 626,000 BTC to about 653,000 BTC. After an increase of about 27,000 BTC, or 4.3%, the total dollar value of positions reached $56.2 billion.
The rise in open interest alongside the price indicates that new positions are accompanying the move. While this measure alone does not show the direction of those positions, the increase in funding costs points to stronger demand for bullish positions.
Why has betting on further gains become more expensive?
In perpetual futures, funding is a periodic payment between holders of long and short positions. When the rate is positive, long position holders, who expect prices to rise, pay short position holders, who expect prices to fall.
The recent increase in this cost shows that investors are willing to pay more to maintain their bullish positions. But if Bitcoin sees a sudden pullback, leveraged investors could face position-holding costs in addition to price losses.
The recovery began near one-year lows
Open interest stood at about 625,000 BTC at the end of September, close to its lowest levels in the past 12 months. The latest increase therefore came from a low base after a prolonged period of weakness.
This picture shows that investors have begun taking positions again, while also indicating that the rise is unfolding alongside higher leverage costs. The key risk ahead of the jobs report is how well these positions would hold up if prices reversed.
Crypto-related stocks also rose in premarket trading on Friday, according to the report. Strategy and Strive gained about 3%, while Coinbase and Robinhood rose 2%.