Bitcoin Open Interest Plummets as Funding Rates Soar
Bitcoin's open interest has been on the decline, but the concentration in long positions is increasing again. This trend has been observed by on-chain analyst Axel Adler Jr., who noted that the derivatives market remains in a deleveraging phase.
The current Bitcoin open interest stands at 318,600 BTC, representing a 3.8% drop from its previous level of 331,100 BTC on Aug. 21. Additionally, there was a 2,850 BTC decrease in open interest over the past 24 hours.
Funding rates have been rising quickly since Friday, with the current rate standing at 0.00906%, exceeding the eight-hour average of 0.00821% and the 24-hour average of 0.00725%. This indicates that long positioning is becoming more concentrated in the short term.
Adler warned that while the market is not yet overheated, it is becoming increasingly sensitive to downside moves. He cautioned that if open interest starts rising again while funding rates continue to climb, long leverage would be rebuilt quickly, increasing the risk of a long squeeze if prices fall.