TL;DR
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“Futures contracts” are essentially bets on whether a stock/asset (e.g. Bitcoin) will rise or fall on a certain date in the future.
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The more bets, the higher the ‘open interest’. Typically, the higher the outstanding interest, the higher Bitcoin price increases.
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Open interest in Bitcoin futures just jumped from ~$8 to ~$10 billion – that’s the highest since the bear market began in May last year!
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Which means that either new money flows into the market or existing participants increase their investments.
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However you slice it, more outstanding interest = more money flowing into Bitcoin. We’d love to see it!
Full story
You know how when the housing market is hot, more bids are placed on houses?
And when it cools down, does the number of bids drop?
(i.e. more bids = higher prices).
In the futures market, this ‘bid volume’ is referred to as ‘open interest’.
ICYMI Yesterday: Futures contracts are agreements by traders to buy or sell an asset (e.g. Bitcoin) at a fixed price on a specific date.
(They are basically bets on whether a stock/asset will go up or down on a certain date in the future).
When it comes to Bitcoin, the amount of ‘due interest’ is usually reflected in Bitcoin’s real-time price.
Or even better:
If more there is a bet on the future BTC price, the current price goes upwards.
If fewer there is a bet on the future BTC price, the current price goes down.
Full disclosure: This isn’t a perfect description and we’re going to go over many of the complexities here – but the correlation exists!
Take a look at this Bitcoin chart: