Increased open interest signals increased volatility and market risk, warn analysts at Crypto Lion.
Binance's tactics could limit bitcoin's growth and complicate efforts to sustain the market.
The increased #ETF activity creates opportunities for major players to influence #cryptocurrency prices.
In recent days, the cryptocurrency market has made an impressive comeback as #bitcoin , the largest cryptocurrency by market capitalization, staged its strongest rally over the weekend, breaking the $71,000 mark for the first time since March. But hold on! Despite such impressive growth, CryptoQuant's analyst on the Crypto Lion chain raised a red flag. He warns that the ratio of market capitalization to open interest indicates that the market is entering dangerous waters.
According to Lion, the ratio of market capitalization to open interest - a key indicator of market risk - is sounding the alarm. The ratio helps investors gauge potential market risk and indicates that open interest is at alarmingly high levels.
Since the FTX collapse in August 2023, open interest has risen sharply. Meanwhile, since bitcoin hit $49,000 in August 2024, major exchanges seem to be using both spot and open-ended contracts to put pressure on the market, suppressing prices and limiting growth.
This has caused the ratio of market capitalization to open interest to reach dangerous levels, alarming traders.
Crypto Lion believes that Binance's approach is increasing market volatility. By using spot contracts and open-ended contracts, #Binance seems to be putting downward pressure on prices and making it difficult for the market to grow. This tactic creates a particularly difficult environment for traders waiting for a breakout. The expansion of cryptocurrency-related exchange-traded funds (ETFs) by exchanges such as Coinbase, while seen as positive for long-term growth, may increase complexity and make it easier for large players to influence market trends.
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