Bitcoin (BTC) has been highly volatile in contempo weeks, rallying higher up $16,000 for the first time in iii years. Just the futures market'due south open up interest indicates that a large volatility spike is likely very close.

The term "open up involvement" refers to the full sum of contracts that are actively open in the futures marketplace. If the open interest is high, information technology ways there is a high number of traders betting on Bitcoin price activity.

Bitcoin futures aggregated open involvement. Source: Skew

Currently, every bit of Nov. 13, Bitazu Capital founding partner Mohit Sorout pointed out that the open up involvement of Bitcoin futures is at an best high. This means that the chances of heightened volatility in the near term should non come as a surprise.

Sorout said that the "liquidation fest" has non started, referring to Bitcoin's trend to see cascading liquidations following big price movements. He said:

"BTC futures and perpetuals aggregated Open Interest has made a new all time loftier today Liquidation fest hasn't fifty-fifty started."

Higher open interest may trigger major volatility

Bitcoin futures contracts typically offering high leverage of up to 125x. Traders tin can proceeds access to anywhere betwixt 1x to 125x leverage depending on the platform.

When the leverage of a position is high, it means the liquidation price is closer to the entry toll. As an instance, if a trader places a 20x Bitcoin long at $16,300. With a 20x leverage, a trader can trade $200,000 with $10,000 worth of capital.

But the loftier leverage means that the liquidation price ranger is tighter. In the case of the 20x long at $16,300, if BTC drops beneath $fifteen,600, the position would get liquidated.

If a position gets liquidated with a cease-loss in place, the trade would wipe out the entire position. Hence, if a $10,000 long ($200,000 position) on 20x gets liquidated, then $10,000 would be lost completely.

As such, when a major cost movement occurs and the open involvement of the futures market is high, Bitcoin tends to meet massive volatility spikes.

Whether this trend would have a positive or a negative impact on Bitcoin'due south near-term price cycle remains uncertain. If long contracts get squeezed, then the BTC toll drops, and if brusk contracts get liquidated, it increases.

Across major futures exchanges, the average funding rate of Bitcoin is 0.01%. This ways that the market is relatively balanced, and neither buyers nor sellers are overwhelming the market place.

The options market is also heating up

The rest of the Bitcoin derivatives market place is similarly seeing an increase in trading action and open interest.

Deribit, the top cryptocurrency options commutation, shared Skew's nautical chart showing total Bitcoin options open interest likewise reached a record high in the past few days.

Full BTC options open interest. Source: Skew

The timing of the options market's open interest soaring is noteworthy because theoretically, options open interest should tiptop toward the stop of the month.

The monthly BTC options contracts expire on the fourth Friday of each calendar month, and as such, open up interest tends to fasten in the last week of every month.

Simply, as Cointelegraph reported, data shows that bulls are not fazed by the upcoming $525 meg options death. As long every bit BTC remains above $15,500, the large options expiry won't likely have a major impact on the price.