On-chain data shows that the Bitcoin open interest RSI is currently forming a pattern that could lead to a short-term correction in the asset’s value.
Bitcoin Open Interest 14-day RSI has been rising lately
As noted by an analyst in a CryptoQuant after, there could be a near-term bearish correction for BTC soon. The “open interestis an indicator that measures the total number of Bitcoin futures contracts currently open on derivatives exchanges. The statistics take into account both long and short contracts.
When the value of this metric rises, it means that investors are currently opening more contracts on derivatives exchanges. Such a trend could result in higher volatility for the price of the cryptocurrency as it implies increasing leverage in the market.
On the other hand, declining values suggest that holders are being liquidated or their futures contracts are currently closing. Of course, this could lead to a more stable price of BTC due to the smaller leverage.
The relevant measure in the context of the current discussion is not the open interest rate itself, but the 14-day RSI. The Relative Strength Index (RSI) is a momentum oscillator that tracks the rate and direction of changes in the value of a metric over a period of time. The chart below shows the trend in the 14-day RSI of Bitcoin open interest over the past year:
The value of the metric seems to have seen some rise in recent days | Source: CryptoQuant
As you can see in the chart above, the quant has highlighted the relevant regions of the trend for the Bitcoin open interest RSI (14). It seems that when the RSI has risen while the BTC price is moving sideways or downwards, a bearish divergence has occurred for the crypto and the price has corrected.
There have been other instances of a rising open interest RSI over the past year, but they all involved an increase in the price itself (and not a consolidation or decline), so the same pattern never applied to them. Lately, however, the statistic has risen again, and this time the price moved sideways at the same time, meaning that the bearish divergence like those earlier cases is now forming.
If the trend of the previous events does indeed repeat itself this time around, Bitcoin could soon see another short-term correction in its price.
BTC price
At the moment of writing, The price of Bitcoin floating around $16,800, up 1% over the past week.
Looks like the value of the crypto has enjoyed some uptrend in the last few days | Source: BTCUSD on TradingView
Featured image of Becca on Unsplash.com, charts from TradingView.com, CryptoQuant.com