Bitcoin Rally is back, but Futures Activity says it never left

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please review our website policy before making any financial decisions.

The Bitcoin derivatives market is doing well despite heightened fear relative to the crypto Fear & Greed (FGI) index. It looks like the appearance of Omicron has created a delay effect on open interest against FGI, but the Bitcoin rally is expected to proceed on schedule.

What happened to Bitcoin in November?

November was a difficult month for Bitcoin investors. Just as the Fear & Greed Index was approaching “extreme greed” on November 9, at 84 points (out of 100), a day later, Bitcoin hit an ATH of $ 69,000. At this point, big drops have started to occur, five times in total (at the time of writing), representing a drop of around 18% from November 10.

Bitcoin’s price movements in November suffered 5 crashes, mostly due to liquidations in the derivatives market. (image credit:

In turn, the fear and greed index went from a high level of greed at 84 to fear, currently at 32 points.

Crypto Fear & Greed Index, (image credit:

The question is, why did the first drop occur? It turns out that this is largely due to the effect of open interest positions. Futures are a type of derivative where traders place bets on the rise (long position) or fall (short position) of the price of BTC. In turn, the total number of these contracts represents open interest.

What matters most when looking at the impact on the price of BTC is that these contracts use more BTC as collateral and less USD or stablecoins. For long positions, if the price turns sour, traders are exposed not only to losses, but also to a fall in the value of their collateral, if guaranteed in BTC.

Therefore, it is true that the aggregate open interest of Bitcoin futures contracts peaked on November 10, 2021, at $ 28.85 billion.

With all this pressure from derivatives, a liquidation event occurred, causing the market to pull out. What is interesting, however, is that the futures market remains largely unfazed.

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This is not the historical norm: a strong fear coupled with a strong open interest

On November 28, Bitcoin rose 5%, recovering from the last steep drop two days earlier. During this tracing period, BTC’s open interest fell from just $ 23.29 billion to $ 22.78 billion, and is again up to around $ 23.47 billion (at the time of writing). At the same time, the Fear & Greed Index hit the lowest level on record since September 30, at 21 points.

In 2021, the FUD from Elon Musk and China in May almost brought Bitcoin to its knees. (image credit:

However, open interest quickly rebounded, without the Fear & Greed Index following suit. This is quite revealing as the two tend to be highly correlated with each other. This means that if the crypto market becomes fearful, open interest also decreases.

Relationship between the Fear & Greed Index and the Open Interest activity. (image credit: Delphi Digital)

What does this mean for Bitcoin investors? The term sellouts coincided with the announcement of the new “Omicron variant” which wreaked havoc on the stock market, with the S&P 500 falling 1.2% and the Nasdaq composite falling 1.8%. However, the fear that it has sparked in the crypto market must be seen as a fear that should quickly dissipate.

After all, in times of distress Bitcoin shines because of its anti-fragility, as an asset detached from the manipulated central bank monetary system. Such a view is shared even by traditional investors, most notably experienced billionaire investor Ray Dalio of Bridgewater Associates.

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Many crypto investors have been waiting for fear to spread and the price of Bitcoin to drop, as this is usually the best time to buy the downside. Were you one of them? Let us know in the comments below.

About the Author

Tim Fries is the co-founder of The Tokenist. He has a BSc in Mechanical Engineering from the University of Michigan and an MBA from the Booth School of Business at the University of Chicago. Tim was a Senior Associate in the investment team of RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and protection solutions. control.


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