An open interest spike denotes a sudden, sharp increase in the total number of outstanding derivatives contracts. In cryptocurrency futures and options markets, this refers to a rapid rise in the aggregate count of contracts that have not yet been closed or settled. A significant spike suggests a substantial influx of new capital and positions entering the market, indicating heightened trader activity and conviction. This metric is a crucial gauge of liquidity and potential future price volatility.
Context
Crypto news frequently highlights open interest spikes as a precursor to significant price movements or increased market speculation. Analysts monitor these spikes to identify periods of potential market instability or strong directional momentum. A rapid increase can signal a build-up of leveraged positions, which could lead to cascading liquidations if prices move unexpectedly.
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