In that location was a time when BitMEX derivatives substitution reigned sovereign over other exchanges, and the company effectively held a fifty% marketplace share until July 2019. For this reason, traders kept a close eye on every indicator connected to BitMEX, including its funding rate, open interest, and basis.

Open interest measures the total number of contracts held by market place participants. Equally the figure rises higher, so does the potential size of liquidations. On Aug. two, a $1,400 crash happened every bit $1 billion in futures contracts were forcefully closed due to insufficient margins.

Although in that location is no magic number, traders tend to get shaky as open interest nears $ane billion, causing a phenomenon some traders refer to as the BitMEX ghost. This became axiomatic during the second one-half of 2019, when massive Bitcoin price crashes occurred on seven different instances when open up involvement tops $ane billion.

The perceived gamble associated with loftier open interest depends on how liquid the underlying asset is. During the third quarter of 2019, Bitcoin'due south regular volume on spot exchanges averaged $ii.4 billion per twenty-four hour period. Thus, a single contract totaling 42% of the Bitcoin volume seemed sizeable plenty.

Bitcoin toll vs. BitMEX perpetual open interest, USD. Source: TradingView

Every bit the chart above depicts, there is niggling doubt that open up interest near $1 billion coincided with relevant price crashes from July through September. It is worth noting that a notable number of contracts in play cannot be deemed bullish or bearish.

The second half of 2019 was mostly surly

The latter one-half of 2019 was quite rough for cryptocurrencies, and as most investors volition recall, fifty-fifty President Trump publicly bashed Bitcoin, as reported by Cointelegraph. All this happened while the United States Treasury Secretary Steven Mnuchin demanded additional regulation and oversight for the sector.

Aggregate Bitcoin futures open interest on November. 2019, USD. Source: Skew

The chart above shows much improve particular of how relevant BitMEX's 40% market share was back then. A single commutation held an open interest equivalent to half of Bitcoin's daily spot volume.

Fast forward to 2020, and BitMEX has been dethroned by OKEx, where the total open interest on perpetual and fixed-month futures surpassed $i billion on July 25.

Aggregate Bitcoin futures open interest, USD. Source: Skew

The remaining contenders kept growing their share, just it was merely recently that Chicago Mercantile Commutation (CME), Binance, and Bybit managed to interruption the psychological $1 billion barrier.

Today's market marginally resembles 2019, but with less take chances

Oddly enough, this happened on November. 20, just 4 days ahead of the 16% crash to $16,334. The total futures open up involvement on Sept. 2019 totaled $3 billion to put things in perspective. This time around, four exchanges were able to break the $i billion barrier.

Although futures open interest grew to $seven.4 billion, so did the daily average book on regular spot exchanges where the effigy now reads $3.five billion. Thus, unlike the previous year, a single exchange holding a $ane billion open involvement should non raise eyebrows in the same style that it did in 2019.

To sum up, the markets take grown and developed to the extent that the BitMEX ghost is gone but it might accept been replaced by a similar miracle that occurs when four exchanges cross the $1 billion futures open interest mark.

Regardless, one should go along a shut center on such an indicator from at present on as those 4 exchanges have replaced BitMEX as the market leader. Combined, Binance, CME, OKEx, and Bybit concur over half of the futures' open interest. Although such a coincidence has just happened one time, it indeed mimics the $ane billion outcome from the past.

The views and opinions expressed hither are solely those of the autho r and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should conduct your ain inquiry when making a decision.