Bitcoin open interest falls 30%, setting up bullish recovery: Analyst

Bitcoin’s market structure has undergone a rapid deleveraging event following the recent price correction. According to leading market analysts, Bitcoin Open Interest (OI) across major derivatives exchanges has plummeted by approximately 30% from its recent peaks. This sharp decline, often signaling a cleansing of excess leverage from the system, is being hailed as the crucial prerequisite for establishing a sustainable bullish recovery.

Open interest, which represents the total number of outstanding futures or options contracts that have not been settled, is a key indicator of market leverage and participation. When OI rises rapidly alongside price, it often indicates heavy speculation, which creates unstable market conditions prone to violent shakeouts. The 30% drop witnessed over the past week or so indicates a massive washout of highly leveraged long positions.

Analysts argue that this mandatory deleveraging phase is inherently bullish in the mid-to-long term. An overleveraged market is susceptible to severe corrections because even marginal price dips can trigger large-scale liquidations, worsening the drawdown. By contrast, a market with significantly lower OI, coupled with neutral or negative funding rates, suggests that new capital entering the market will face less immediate systemic resistance from cascading liquidations.

This ‘healthier’ foundation reduces the overall systemic risk for new long entries. The contraction in OI has brought the metric back down to levels last seen before the major rally phase began, confirming that much of the speculative froth has largely been removed. While the price of BTC has endured volatility, its ability to hold key technical support levels amidst this leverage purge further reinforces the positive outlook.

In summary, the substantial reduction in Bitcoin open interest is interpreted not as a sign of fading institutional interest, but rather as a vital structural adjustment. By flushing out overextended traders, the market has cleared the path for healthier, spot-driven demand to lead the next sustained bullish cycle.

Source: Bitcoin open interest falls 30%, setting up bullish recovery: Analyst