Altcoins open interest surges to new all-time high amid declining Bitcoin volatility

The altcoin market's futures open interest (OI) surged to a record $47 billion, driven by rapid price gains, according to a Glassnode report on Tuesday. The surge comes amid a decline in Bitcoin's (BTC) at-the-money implied volatility (ATM IV), which historically precedes sudden price swings.

Altcoins show strong performance as Bitcoin volatility remains muted

The crypto market is showing potential for price movements, as the futures OI of top altcoins set a new record of $47 billion, according to a Tuesday report from on-chain analytics firm Glassnode.

The rise indicates a high appetite for leverage among investors, setting the pace for a "more reflexive and fragile market environment."

The surge in open interest follows a rally in the altcoin market, led by Ethereum, which surged above $4,500 on Tuesday.

It also highlights a growing rotation of capital from Bitcoin into altcoins, reflected by a drop in BTC's Dominance Metric from 65% to 59% over the past two months.

Bitcoin currently trades at $120,000, approaching its all-time high of $123,091 after rebounding from last week's dip to $112,000. 

Glassnode highlights that the renewed upward momentum could signal the start of a new price discovery phase, with 95% of holders still sitting on unrealized gains and remaining in profit.

In the options market, Bitcoin's at-the-money implied volatility (ATM IV) has seen a steady decline, indicating traders are not yet pricing in a transition to a high-volatility environment. 

The report noted that periods of such muted volatility expectations have frequently preceded sharp market swings, making the current trend a potential "contrarian indicator."

"While these conditions can persist, they leave the market exposed to sudden volatility spikes if a catalyst emerges, as past cycles have shown through sharp, disorderly price swings when risk is rapidly repriced," Glassnode stated.

To determine the upside target for Bitcoin, Glassnode uses the Short-Term Holder Cost Basis, highlighting $127,000 as the first major resistance to watch. The report indicates that a break above this level could set the pace for Bitcoin to reach $144,000.

On the other hand, using the +1 standard deviation level for Active Realized Price, the report highlights $4,700 as a near term resistance zone for ETH.