Crypto sell-off saps $1.5B in open interest, funding rates dip negative

Low levels of volatility, which had plagued the market for over a month, finally cracked on Thursday as price action sent derivatives reeling

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Jacco/Shutterstock, modified by Blockworks

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After weeks of inactivity, crypto sprang to life Thursday, sending shockwaves throughout the derivatives market.

Total open interest for bitcoin, a measure of the total futures contracts outstanding, fell by just under $1.5 billion across Bybit, Binance, OKX and Deribit, data shows.

Rising open interest generally indicates that new money is coming into the market, reflecting increased interest or bullish sentiment. Declining interest suggests the market is becoming less interested in the underlying asset, reflecting bearish sentiment.

Source: Velo

While spot market valuations witnessed steep losses, derivatives traders were hardest hit with liquidations on long positions wiping more than $200 million over a 24-hour period, Blockworks previously reported.

“Generally, traders have stop losses set and a trigger of news catalysts might drive cascades of liquidations, not necessarily indicating active sell pressure but more so the aftermath of a liquidation effect,” Sylvia To, research lead at crypto exchange Bullish told Blockworks.

Open interest across large-cap digital assets, meanwhile, fell between 2% and 25%. The bitcoin-led sell-off drove futures open-interest-weighted funding rates into negative territory, dipping to its lowest point since March, CoinGlass data shows.

Source: Coinglass

Negative funding rates, alongside open interest and liquidation data, can often indicate that the majority of market participants are shorting a given asset. 

Extreme negative funding rates have sometimes been followed by sharp price reversals as witnessed by a move that followed a 25% jump in spot prices five months ago.

Global crypto market capitalization now stands at $1.1 trillion, marking a decrease of 6.2% in the last 24 hours and a drop of 5.4% compared to one year ago, CoinGecko data shows.


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