Bitcoin Derivatives Market Flashing Signs of Caution

Open interest has fallen alongside a declining bitcoin price and a negative funding rate, suggesting traders remain reluctant to throw caution to a heated rally

article-image

Source: Shutterstock / William Potter, modified by Blockworks

share

As bitcoin continues to jostle for a position above $30,000, traders in the derivatives market have begun to take some profit off the table.

A look at bitcoin’s (BTC) price action to the downside alongside falling funding rates suggests less demand for long positions remains in the market as traders eye short-term selling.

Prices for the world’s oldest crypto shed more than 5% on Wednesday, falling from around $30,400 to $28,600 before recovering slightly to $29,000. 

Single-day spot trade volume shot up to its highest in almost a month, suggesting conviction in the move for BTC traders. 

Aggregate futures volume, meanwhile, has remained steady growing day by day across multiple exchanges, data from Coinglass shows.

Across Bybit, Binance, Gate.io and others, funding rates for bitcoin perpetual contracts flipped slightly negative for the first time since April 10, data from CryptoQuant shows, and are roughly flat as of 5:30 am ET, Thursday.

When funding rates are negative, it means traders holding short positions — betting the price will go down — are paying fees to traders holding long positions. Rates typically reflect demand for a given contract and therefore the underlying asset.

Coupled with the negative flip, open interest has also fallen since April 13 — indicating caution and a washout of over-leveraged long positions. The total value of OI on outstanding contracts has fallen from $9.5 billion to $8.3 billion over that period, marking the steepest 7-day decline since late March, CryptoQuant data shows.

“The negative funding rate reactions and coinciding decline in open interest suggest that perp traders with long exposure maintain a conservative approach,” research firm K33 said in a recent report.

“Reducing exposure amidst strength, leading perps to trade below spot” has done little to impact the structure of perpetual contacts, which remain in a “constructive and healthy state,” the firm said.


Get the news in your inbox. Explore Blockworks newsletters:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
  • Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
Tags

Upcoming Events

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.jpg

Research

Bluefin possibly stands at an inflection point. The token is near an all-time low yet the protocol’s spot volume market share and derivatives exchange usage have been increasing month over month since its November launch. Given its current market position and the upcoming upgrades (for both Bluefin and SUI), there may be upside potential before the increased supply growth in December. However, strong opposition from existing competitors (like Cetus and Suilend), as well as new entrants (like Aftermath), pose key challenges to Bluefin’s medium-term success.

article-image

What Grayscale’s watching going into the second quarter and why crypto had a rough start to the year

article-image

Sol’s price drop was partially triggered by one of the year’s more chaotic memecoin events

article-image

Are digital assets just part of “normal” finance conversations now?

article-image

It’s a busy week as DC prepares for confirmations and policies that may have major impacts on crypto

article-image

NFT collection Azuki is releasing anime-inspired decks for a physical trading card game

article-image

Fidelity is planning a stablecoin launch, FT reports, as more companies flock to the digital-dollar business