Bitcoin open interest drops 30%: Deleveraging signal or a sign of a bear market?

【ChainNews】Recent changes in the Bitcoin derivatives market are worth paying attention to. Data shows that open interest has decreased by about 30% from the all-time high of over $15 billion in October last year.

What does this mean? On the surface, this is a typical “deleveraging” phenomenon—the market is clearing out accumulated excessive leverage. History tells us that such significant contractions often occur near important bottoms, laying the groundwork for subsequent bullish trends.

But the details are crucial. When Bitcoin’s price rises while open interest declines, what does that indicate? It usually suggests that leveraged short positions are being closed or liquidated. In other words, a “short squeeze” is happening—short sellers are being forced out, and the price increase is driven more by spot buying rather than leverage. From this perspective, it is bullish for Bitcoin.

However, don’t get too optimistic. If Bitcoin continues to decline and truly enters a bear market, open interest will further shrink, implying deeper deleveraging and a longer adjustment cycle.

There’s another detail that shouldn’t be overlooked: although the market is deleveraging, the structure of derivatives has not fundamentally entered a structurally bullish phase. Currently, it more resembles a passive reaction to rapid price increases rather than active institutional positioning. Therefore, the driving forces behind the rally still need further observation.