Bitcoin Futures Open Interest Reaches New High, Boosting Bullish Market Sentiment

Since Bitcoin tested $70,300 on May 27th, it has been on a downward trend, with the current price approaching $67,500, a 4% decrease in two days. However, the $66,000 support level has remained stable since May 17th, providing some downside protection for the market. In addition, the total open interest of Bitcoin futures market has increased to 516,000 BTC, the highest level since January 2023, indicating market activity and investor optimism.

Price Trend Analysis

Since testing $70,300 on May 27th, the price of Bitcoin has fallen to $67,500. However, the key support level of $66,000 has remained stable since May 17th, demonstrating strong market confidence at this level. The stability of this support level provides some downside protection for the bulls.

Significance of Open Interest

The increase in open interest of Bitcoin futures market to 516,000 BTC reflects heightened market participants' attention to future price trends. The increase in open interest typically indicates increased market activity and expectations of price volatility.

1. Increased Market Activity: The increase in open interest implies more investors participating in the market, enhancing overall market activity, contributing to price discovery and market depth improvement.

2. Enhanced Bullish Confidence: Despite the recent price pullback, the increase in open interest indicates investors' optimistic outlook for Bitcoin's medium to long-term performance, especially with the stable $66,000 support level, boosting bullish confidence.

Macro-Economic Impact

1. Performance of S&P 500 Index: The S&P 500 index is currently only 1.2% lower than the historical high of 5342 points set on May 23rd, indicating a strong stock market performance. This strong performance has a positive impact on the sentiment in the Bitcoin market.

2. Shift in Fixed Income Investments: The 5-year US Treasury bond yield has risen from 4.34% two weeks ago to 4.63%, indicating investors are shifting away from fixed income investments and favoring the prospects of Bitcoin. This shift was particularly evident at the Treasury auction on May 28th, where benchmark yields fell to a level of concern for stock investors.

Optimistic Sentiment in the Futures Market

1. Derivatives Market Data: Data from the Bitcoin derivatives market shows that the leverage betting amount equivalent to BTC reached a 16-month high on May 29th, indicating an increased positive sentiment towards Bitcoin's future trends.

2. Open Interest and Market Share: On May 29th, the total open interest of Bitcoin futures reached 516,000 BTC. The Chicago Mercantile Exchange (CME) holds a 30% market share, Binance holds 22%, and Bybit holds 15%. High open interest indicates bullish market sentiment, but caution is needed against excessive reliance on leverage leading to liquidation risks.

Market Outlook and Regulatory Environment

1. Positive Regulatory Developments: The relaxation of the US regulatory environment has shown significant resilience in Bitcoin's price. Recent positive regulatory developments include the approval of Ethereum spot ETFs, the Senate vote to repeal the SEC's proposed SAB 121 accounting rule, and Congress passing the FIT 21 reform, collectively driving the bull market in the Bitcoin market.

2. Perpetual Futures and Funding Rates: The current funding rate for perpetual futures is 0.35% per week, indicating moderate leverage costs. During periods of high optimism, this rate could surge to 2.4% per week, reflecting increased market demand for leverage.

3. Futures Premium: The 3-month futures premium is at 14%, higher than the neutral range but not excessively high, indicating room for increased leverage in the market without immediate risk of consecutive liquidations.

Conclusion

Despite the recent price correction, the stable support level at $66,000, coupled with the increase in open interest in the futures market, demonstrates market activity and investor optimism. The macro-economic trends and healthy futures market indicators further strengthen the bullish outlook for Bitcoin. Investors should pay attention to key support levels and changes in market sentiment to make wise investment decisions in volatile markets.

The increase in open interest, relatively low funding rates, and moderate futures premium indicate a healthy market state, possibly suggesting increased interest from institutional investors in Bitcoin, implying a bullish outlook in the short term.

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