Open interest in Bitcoin derivatives markets has declined over the past three months, resulting in dwindling leverage that has become bullish for the overall market structure, according to CryptoQuant.
A 31% decline in open interest (OI) on Bitcoin derivatives since October is a “deleveraging signal” which helps purge the excess leverage built up in the market, said the on-chain analytics provider on Wednesday.
“Historically, they have often marked significant bottoms, effectively resetting the market and creating a stronger base for a potential bullish recovery,” said crypto analyst “Darkfost,” who was quoted in the post.
The analyst said that this could be the case again, but cautioned that if Bitcoin (BTC) continues to slide and fully enters a bear market, “open interest could contract further, signaling deeper deleveraging and a potential extension of the correction.”
OI refers to the number or value of crypto derivatives contracts that have yet to be settled and remain “open.” Deleveraging is the unwinding of risky positions, reducing the risk of cascading liquidations that could trigger sharp price drops, as was seen in the Oct. 10 crash.
Bitcoin open interest tripled in 2025
Last year’s crypto derivatives “speculative frenzy” resulted in a surge in Bitcoin’s open interest, which reached an all-time high of over $15 billion on Oct. 6, the analyst noted.
During the previous bull market peak in November 2021, BTC open interest on Binance peaked at $5.7 billion, meaning that OI nearly tripled in 2025.
Related: Bitcoin hits 2026 high above $97K, data shows sufficient fuel for higher prices
During a price rally with declining open interest, it often means leveraged short positions are being liquidated or closed.
Traders who bet against Bitcoin are exiting their positions at a loss, which removes selling pressure from the market. This “short squeeze” scenario can be bullish because it suggests the price increase is driven by spot buying rather than excessive leverage, making the rally more sustainable.
This appears to be the case at the moment, as spot BTC prices have gained almost 10% since the beginning of this year.
Derivatives are not in bull market yet
Total Bitcoin OI across all exchanges and all derivatives markets is currently around $65 billion, according to CoinGlass. This is down around 28% from the peak of just over $90 billion in early October, in line with CryptoQuant’s percentage decline figures.
On Deribit Bitcoin options markets, OI is highest at the $100,000 strike price, which has a $2.2 billion notional value, suggesting that traders are bullish as there are more long (call) bets than shorts (puts).
However, the derivatives market “has not yet entered a structurally bullish phase,” reported crypto derivatives provider Greeks Live on Wednesday.
“The current trading structure appears more like a reactive response to the sudden surge, with the long-term outlook still not shifting toward a bull market,” they added.
Magazine: Trump rules out SBF pardon, Bitcoin in ‘boring sideways’: Hodler’s Digest
