ANALYSIS: Open Positions in BTC Remain Stable Despite Decline in BTC Futures OI

July 4 (Bloomberg) -- The volume of notional open positions in bitcoin futures and perpetual futures has declined by about 18 percent from $37 billion to $30.2 billion in a month, while at the same time the cryptocurrency's spot market price has fallen by 14 percent, according to Coinglass data, CoinDesk reported. The data suggests that long or bullish leveraged bets (in anticipation of higher prices) have been closed out over the past four weeks. In other words, the decline in Bitcoin's price was driven by the unwinding of bullish bets. This statement is only partially true, though, and it belies the bullish undercurrent in the market.

Open interest is the number of contracts that are active or open at a given time, while notional open interest is calculated by multiplying the number of units in a contract by its current spot market price. Therefore, even if the total number of contracts remains constant, changes in asset prices can affect the notional open position volume, thus painting a misleading picture of market activity. This seems to be the case in the bitcoin market.

Coinglass says that the open position volume has remained steady above 500,000 bitcoins for the past four weeks. Meanwhile, the perpetual funding rate charged by exchanges every eight hours has remained positive, indicating a bias toward bullish bets. The volume of open positions denominated in bitcoin has remained steady and the funding rate has stayed positive while the notional open position has declined, suggesting that some traders have been establishing new long positions to offset the so-called lifting of bullish bets by other market participants.This suggests that traders haven't been hesitant to go long yet, according to CEC Capital crypto ETF specialist Laurent Kssis. Perhaps traders are hoping that Bitcoin may resume its uptrend once the selling pressure from the Mt. Gox compensation and miner sell-off runs out.