Since Bitcoin (BTC) reached its all-time high (ATH) of $109,000 in mid-January, the leading cryptocurrency has witnessed a decline of approximately 30%. This downward trend extends beyond mere price fluctuations, as evidenced by significant changes in the network’s open interest.
Data from the market intelligence platform Glassnode indicates a notable decrease in Bitcoin Futures open interest, plummeting from $57 billion to $37 billion—a staggering 35% decline over a short period. This reduction reflects diminished speculation and hedging activity within the market.
Futures open interest has dropped from $57B to $37B (-35%) since #Bitcoin’s ATH, signaling reduced speculation and hedging activity. This decline mirrors the contraction seen in on-chain liquidity, pointing to broader risk-off behavior. pic.twitter.com/XPbXiHXlRS
— glassnode (@glassnode) March 20, 2025
Futures Open Interest Falls 35%
The decline in Bitcoin Futures open interest, as noted by Glassnode, parallels a contraction in the asset’s on-chain liquidity, suggesting a broader risk-off sentiment among traders.
When Bitcoin Futures open interest decreases, traders are often closing their positions, which can stem from various factors such as reduced market activity, potential trend reversals, profit-taking, uncertainty, and a declining confidence in Bitcoin’s trajectory.
Regardless of the underlying reasons for this drop, a lower level of Bitcoin Futures open interest typically results in fewer outstanding contracts. This condition can weaken bullish momentum, diminish leverage, reduce volatility, and potentially increase selling pressure.
CryptoPotato previously reported that the Bitcoin market has been deleveraging since mid-February, resulting in over $10 billion being eliminated during a substantial liquidation of leveraged positions. Historically, such occurrences have presented profitable short and medium-term opportunities for BTC traders.
Potential Short-Term Volatility
As BTC surged toward its ATH in mid-January, the Bitcoin Futures Perpetual Funding Rate rose to 0.035%, its highest level since December 5, 2024. This surge indicated that long traders were frequently compensating short traders for their positions. However, this overwhelming optimism led to an overheated market, culminating in a price correction that was exacerbated by widespread liquidation.
The widespread liquidation diluted the long-side bias, causing an unwinding of cash-and-carry trades in the futures market. Additionally, significant outflows from spot Bitcoin exchange-traded funds (ETFs) and closures of futures contracts on the Chicago Mercantile Exchange (CME) contributed to mounting selling pressure in spot markets.
Although lower Bitcoin Futures open interest generally corresponds with lesser volatility due to decreased leverage, Glassnode posits that spot Bitcoin ETFs, being less liquid than the futures market, could actually escalate short-term volatility.
As of the time of writing, data from CoinMarketCap indicates that BTC is trading around $83,960, reflecting a 2.18% decline in the last 24 hours. Notably, Bitcoin has remained below $90,000 for the past two weeks.
The insights in this post are essential for understanding the current market dynamics of Bitcoin Futures open interest and its implications for traders moving forward.
