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There was a time when BitMEX derivatives exchange ruled sovereignly over other exchanges, and the company effectively had a market share of 50% until July 2019. For this reason, traders kept a close eye on every indicator associated with BitMEX, including funding rate, outstanding interest, and base.

Open interest measures the total number of contracts held by market participants. As the figure gets higher, so does the potential size of liquidations. On August 2, a A $ 1,400 crash occurred like $ 1 billion in futures contracts were forcibly closed due to insufficient margins.

While there is no magic number, traders tend to get shaky as outstanding interest approaches nearly $ 1 billion, causing a phenomenon some traders call the BitMEX ghost. This became apparent in the second half of 2019, when massive Bitcoin price crashes occurred in seven different instances where interest outstanding exceeded $ 1 billion.

The perceived risk associated with a high outstanding interest rate depends on how liquid the underlying asset is. During the third quarter of 2019, Bitcoin’s regular volume on spot exchanges averaged $ 2.4 billion per day. So a single contract totaling 42% of the Bitcoin volume seemed bulky enough.

Bitcoin Price vs BitMEX Perpetual Open Interest, USD. Source: TradingView

As the chart above shows, there is no doubt that outstanding interest of nearly $ 1 billion coincided with relevant price crashes from July to September. It’s worth noting that a significant number of ongoing contracts cannot be considered bullish or bearish.

The second half of 2019 was mostly bearish

The second half of 2019 was pretty tough for cryptocurrencies, and as most investors will remember, in fact President Trump publicly beat up Bitcoin, as reported by Cointelegraph. All this happened while the US Secretary of the Treasury Steven Mnuchin demanded additional regulations and overview for the sector.

Aggregated Open Rate for Bitcoin Futures on November 2019, USD. Source: Skew

The chart above shows much more detail of how relevant BitMEX’s 40% market share was back then. A single exchange had an outstanding interest equal to half of Bitcoin’s daily spot volume.

Fast forward to 2020, and BitMEX has been dethroned by OKEx, where total outstanding interest on perpetual and fixed-month futures on July 25 was more than $ 1 billion.

Aggregated Bitcoin Futures Open Rate, USD. Source: Skew

The remaining contenders continued to increase their share, but it was only recently that Chicago Mercantile Exchange (CME), Binance and Bybit managed to break the $ 1 billion psychological barrier.

The current market appears marginal to 2019, but with less risk

Strangely, this happened on Nov. 20, just four days before the 16% crash to $ 16,334. Total open interest on futures as of September 2019 totaled $ 3 billion to put things in perspective. This time, four exchanges managed to break the $ 1 billion barrier.

although outstanding interest on futures grew to $ 7.4 billion, as is the daily average volume on regular spot exchanges, where the figure is now $ 3.5 billion. So, unlike the previous year, a single exchange with $ 1 billion of interest outstanding shouldn’t raise eyebrows in the same way it did in 2019.

In short, the markets have grown and evolved to the point where the BitMEX spirit has disappeared, but it could have been replaced by a similar phenomenon that occurs when four exchanges cross the $ 1 billion open interest market.

Either way, you should keep a close eye on such an indicator from now on as those four exchanges have replaced BitMEX as the market leader. Combined, Binance, CME, OKEx and Bybit have more than half of the futures’ open interest. While such a coincidence has only happened once, it does indeed mimic the $ 1 billion effect of the past.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the view of Cointelegraph. Every investment and trade move carries risks. You should do your own research when making a decision.