Bitcoin Price and Futures Leverage Climb Together — Here’s Why That Matters

[Ben Graham]

Bitcoin has extended its upward momentum over the past week, gaining nearly 6% in that time and 1.8% in the past 24 hours. At the time of writing, BTC is trading at $120,499, maintaining its position near a key resistance zone between $119,000 and $120,000.

Market data indicates that traders are watching this price area closely, given its significance in previous price action during July. Recent analysis from CryptoQuant contributor Arab Chain shows that Bitcoin’s open interest (OI) on Binance has climbed to around $13.7 billion, approaching its mid-to-late July highs.

This metric, which tracks the total value of outstanding futures contracts, is often used to gauge market participation and potential volatility. The current levels suggest a notable build-up of speculative positions as the price approaches critical resistance.

Bitcoin Leveraged Positions and Potential Market Outcomes

According to Arab Chain, a simultaneous rise in both price and open interest typically signals the entry of new speculative liquidity, most likely from traders taking long positions.

While this can support short-term price increases, it also raises the market’s sensitivity to corrections. If open interest grows faster than price, the rally can become overleveraged, leaving the market vulnerable to a long squeeze in the event of a sharp pullback.

The $119,000–$120,000 range has acted as a decision point in recent months. A breakout above this level with stable or slightly declining open interest could indicate the move is driven by spot buying or short covering, which generally carries less liquidation risk.

In this scenario, Arab Chain sees potential for BTC to target the $122,000–$124,000 range. However, a sharp rejection at these levels with elevated open interest could trigger liquidation-driven declines toward nearby support.

Monitoring Open Interest Trends for Confirmation

Open interest is currently just below the all-time high of approximately $14 billion, leaving limited room for further leveraged build-up before reaching historic extremes.

Arab Chain notes that after a decline in both price and OI from late July to early August, indicating capital exiting the market, both have since rebounded together, suggesting renewed confidence among derivatives traders.

The analyst cautions that a significant jump in open interest without a corresponding price advance, or worse, with a price decline, would point to an overleveraged environment.

Conversely, price stability or gains above $120,000 while open interest holds steady or declines slightly would be a healthier sign, indicating the move is supported by actual buying rather than excessive leverage.

At present, the intraday trend remains bullish, but the sustainability of this move depends on whether leverage levels stabilize as Bitcoin tests resistance.

Traders are likely to focus on how BTC behaves around the $120,000 mark in the coming days, with open interest dynamics serving as a key signal for the next directional move.

Featured image created with DALL-E, Chart from TradingView