JPMorgan Foresees Crypto Markets Stabilizing Soon
By Laxmikant Khanvilkar
JPMorgan Chase,the New York headquartered largest bank in the United States recently released a research note suggesting that the cryptocurrency market is likely to stabilize in the near term.
JPMorgan Chase analysts, including Nikolaos Panigirtzoglou, pointed to a decline in open interest (OI) in CME Bitcoin futures contracts , which usually signals a weakening price trend, as a key factor supporting to improved outlook.
OI refers to the total number of outstanding derivative contracts, such as futures and options that have not been settled. In the context of futures markets, it represents the number of contracts that are held by market participants at the end of each trading day.
OI often help gauge market sentiment and potential changes in trends for several reasons:
- An increase in open interest along with an increase in price usually confirms an existing upward trend.
- A decline in open interest alongside a price decline suggests that a downward trend is likely ending.
- High open interest in a market or contract often means that the price moves are more likely to be significant and sustainable.
- Higher open interest usually means better liquidity, which allows traders to enter and exit positions more easily.
- Comparing volume changes with open interest changes can provide additional insights.
- Extreme levels of open interest might indicate overbought or oversold conditions, which could precede a market reversal.
Careful analysis of changes in open interest in conjunction with other market indicators and price action, help traders to take informed decisions about the likely future price direction.
Bitcoin’s price drop by almost 12% in the past two weeks , is nearing its end.
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