Hull Invest

Bitcoin (BTC) has started a risk-off year as seen in the Futures Open Interest (OI) Crypto Margin indicator displayed below.

Bitcoin: Percent Futures Open Interest crypto-Margined metric - Source: Glassnode.com
Bitcoin: Percent Futures Open Interest crypto-Margined metric – Source: Glassnode.com

The decline in the OI percentage of BTC futures seen from July 2021 to 2022 indicates a return to the risk-on narrative throughout 2022. However, we are starting at about the lowest point in two years, and the risks are quickly removed as 2023 begins.

Through 2021, over 60% of futures contracts used BTC as the underlying asset. This helps with the risk-on narrative as BTC is more volatile compared to stablecoins.

Meanwhile, in 2022, crypto-backed margins remained relatively flat in the 35% to 40% range. However, the downward adjustment of 15% heading into 2023 indicates a rapid de-risking heading into the first quarter.

Bitcoin: Crypto Back Change (Copy) - Source: Glassnode.com
Bitcoin: Crypto Back Change – Source: Glassnode.com

Crypto-backed margins have similarly declined in the previous four cases.

  • May 2021, following China’s ban on cryptocurrencies
  • Between November and December 2021, just after the all-time high (ATH)
  • April 2022 Before and after the collapse of Luna
  • October 2022 has a lead to FTX collapse, entering a rocky fourth quarter from a macro perspective.

Bitcoin: Futures Open INterest Crypto Margin [BTC] - Source: Glassnode.com
Bitcoin: Futures Open Interest Crypto Margin [BTC] – Source: Glassnode.com

About 150,000 BTC remain in futures OI, the lowest level since April 2022, and the risk-off trend continues to decline.

To further reveal the clear switch from BTC to risk-off and cash, the ‘Cash-Margined’ indicator shows a steady rise since April 2021 to the current level of 327,000 BTC. This is backed by cash as the underlying asset.

Bitcoin: Futures Open Interest Cash Margin [BTC] - Source: Grassnode
Bitcoin: Futures Open Interest Cash Margin [BTC] – Source: Glassnode

Disclaimer: The levels shown represent only exchanges covered by Glassnode data.

By Jules

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