According to CryptoQuant, open interest in Bitcoin futures markets has decreased over the last three months, leading to decreasing leverage that has turned positive for the market structure as a whole.
Bitcoin Open Interest Decline Signals Bullish Potential
According to the on-chain analytics company on Wednesday, a 31% drop in open interest (OI) on Bitcoin options since October is a “deleveraging signal” that aids in clearing the market of excess leverage.
According to cryptocurrency expert “Darkfost,” who was cited in the article, “they have historically often signaled big bottoms, essentially resetting the market and building a firmer platform for a prospective bullish comeback.”
Expert Warning on Further Deleveraging
The expert said that this may happen once again, but warned that “open interest might fall further, signifying further deleveraging and a possible extension of the correction” if Bitcoin (BTC) keeps down and completely enters a bear market.
OI is the quantity or value of unsettled, “open” cryptocurrency futures contracts. Unwinding hazardous holdings is known as deleveraging, and it lowers the possibility of cascade liquidations that might cause steep price declines, as was the case with the crisis on October 10.
📊 Bitcoin Open Interest Snapshot
- OI Drop: 31% since October
- Total OI: $65 billion currently
- Peak OI: Over $90 billion in early October
- Market Signal: Deleveraging & potential bullish base
- Spot BTC Gain: ~10% YTD
The “speculative frenzy” around cryptocurrency futures last year led to an increase in Bitcoin’s open interest, which peaked on October 6 at over $15 billion, according to the expert.
BTC open interest on Binance reached a record of $5.7 billion at the last bull market top in November 2021, indicating that OI almost quadrupled in 2025. When open interest declines during a price rise, it often indicates that leveraged short bets are being closed or liquidated.
Short Squeeze & Market Dynamics
The market is no longer under selling pressure because traders who wager against Bitcoin are leaving their holdings at a loss. Because it implies that spot buying rather than excessive leverage is driving the price gain, this “short squeeze” situation might be positive and make the rally more durable.
Given that spot Bitcoin prices have increased by about 10% since the start of the year, this seems to be the situation right now.
Current Bitcoin OI Across Exchanges
According to CoinGlass, the total amount of Bitcoin OI across all exchanges and derivatives markets is presently over $65 billion. According to CryptoQuant’s percentage fall estimates, this is down around 28% from the top of little over $90 billion in early October.
OI is strongest in Deribit Bitcoin options markets at the $100,000 strike price, which has a $2.2 billion notional value. This indicates that traders are optimistic because there are more long (call) bets than shorts (puts).
⚠️ Bitcoin Market Outlook
- Market Status: Not yet fundamentally bullish
- Trading Structure: Reactionary, post-OI drop
- Long-term Trend: Still not confirmed bullish
On Wednesday, cryptocurrency derivatives supplier Greeks Live said that the derivatives market “has not yet reached a fundamentally positive period.”
“With the long-term view still not turning toward a bull market, the present trading structure seems more like a reactionary response to the unexpected increase,” they said.
Frequently Asked Questions
1. What does a drop in open interest in Bitcoin signify?
There are fewer active or unsettled Bitcoin futures contracts as open interest (OI) declines. This often signifies deleveraging, which lowers the likelihood of forced liquidations and sharp price movements by having traders close hazardous holdings.
2. What makes the 31% decline in OI bullish?
The decline in OI indicates a decrease in excessive leverage, which has historically indicated notable market bottoms. Reduced debt may strengthen the basis for a long-term price recovery and lessen the selling pressure from liquidations.
3. How does a “short squeeze” differ from ordinary purchasing?
When traders who are betting against Bitcoin are compelled to settle their positions at a loss, this is known as a short squeeze. Unlike typical spot purchasing, which occurs without pulling others out of positions, this increases buying pressure and often drives prices higher.
4. How does the present OI stack up against earlier peaks?
In contrast to $5.7 billion at the 2021 bull market top on Binance, Bitcoin OI peaked at nearly $90 billion in early October 2025. A deleveraging phase is consistent with the current $65 billion, which represents a considerable drop.
5. Does this imply that a bull market for Bitcoin has officially begun?
Not quite yet. The market structure is still reactive rather than inherently optimistic, according to analysts, notwithstanding the OI reduction and recent price rises (~10% YTD). Before declaring a complete bull market, long-term validation is required.
Conclusion
A deleveraging phase, which has traditionally coincided with market bottoms, is indicated by the 30% drop in Bitcoin open interest. The market has not yet reached a fundamentally positive period, even while this lowers the likelihood of abrupt liquidations and sets up a possible bullish comeback. To verify a long-term rally, traders should keep an eye on OI patterns and the general market structure.
Disclaimer
This content is for informational purposes only and does not constitute financial advice. Please do your own research before making any investment decisions.
