Open interest contracts decreased by 30%, Bitcoin de-leveraging signal confirmed

The Bitcoin derivatives market is undergoing a “downsizing.” According to CryptoQuant data, open interest in Bitcoin contracts has decreased by approximately 30% since October last year, shrinking from a peak of $15 billion to the current level. What does this number reflect? Is the market self-healing, or is it merely a short-term adjustment? The current changes in market structure warrant in-depth observation.

How Strong Are the Deleveraging Signals?

Data comparison is clear

The significant decline in open interest is indeed a clear signal of deleveraging. This indicator measures the total size of open positions in the derivatives market; a higher value indicates more leverage and greater risk in the market.

Why is this important

Historically, similar large declines often mark important market bottoms. When excessive leverage is cleared, the market feels like it has shed a heavy burden, making it easier to rebound upward. Although this “cleansing” process may cause short-term volatility, in the long run, it lays the foundation for a healthy upward trend.

Market Structure Is Quietly Changing

Spot buying becomes the main driver

Most notably, during the rise of Bitcoin from 84.4K to 96K, where is the driving force coming from? According to CryptoQuant data, spot buying pressure has remained strong, indicating that genuine demand is supporting the price increase, rather than leverage-driven speculation.

This is fundamentally different from traditional leveraged bull markets:

• Leverage-driven increases: prone to sharp declines due to unstable foundations
• Spot-driven increases: more sustainable because they are backed by real demand

Concerns over retail participation

However, there is a noteworthy detail—retail participation is significantly lacking. Historical data shows that past large rallies were often accompanied by a substantial increase in retail trading volume, but currently, this indicator has turned deeply negative. What does this mean?

The current rally is mainly driven by institutions and whales, while retail investors are still on the sidelines. This is both an advantage and a risk: the advantage is that the market is more rational and less susceptible to emotional swings; the risk is that once retail investors enter, it could amplify volatility.

What Do Whale Behaviors Confirm?

Slowing sell-offs, evident reluctance to sell

Recent on-chain data shows that whales holding coins for over 5 years are slowing their selling activity significantly, with the 90-day average sell volume dropping from about 2,300 BTC to around 1,000 BTC. This is not a small signal—experienced whales who have gone through multiple bull and bear cycles are choosing to hold rather than cash out, indicating confidence in the market’s future.

Large deposits flooding into Binance

Meanwhile, large Bitcoin deposits into Binance have surged, recently reaching a peak of 21.76 BTC, far exceeding retail fund scales. What does this usually indicate? Major players are actively positioning themselves, preparing to participate in the upcoming market movements.

Has the Bull Market Foundation Truly Been Laid?

From a technical perspective, the decline in open interest indeed clears excessive leverage in the market, which is a positive sign. Coupled with strong spot buying pressure, whale reluctance to sell, and large inflows of capital, there are reasons to believe the market is preparing for a rebound.

However, it’s important to be honest about the remaining uncertainties:

• Low retail participation may limit the upside
• The derivatives market has not yet entered a structurally bullish phase; more it’s a passive response to rising prices
• If Bitcoin prices continue to decline, open interest could further shrink, indicating a deeper correction

Summary

A 30% decrease in Bitcoin open interest is indeed a clear signal of deleveraging, and the market is self-healing. Signs like spot buying support, whale reluctance to sell, and large capital inflows all point in the same direction—market structure is improving. But this is not a “confirmed bull market” signal; rather, it’s “laying the groundwork for a bull.” The real test lies ahead, especially in when retail investors will step in and whether this spot-driven rise can be sustained. In simple terms, deleveraging is a good thing, but it’s not the end—just the beginning.