Bitcoin Rally Turns Spot-Driven as Open Interest Drops 11%

The price of Bitcoin has rallied from $63,500 to $77,700 between August 12 and 18, but this time around, it's not just derivatives speculation driving the market. According to data from analytics firm Santiment, open interest - the total number of outstanding derivative contracts - dropped by 11% in BTC terms during this period.

This decline indicates that the rally is being driven more by spot buying than leveraged bets, which can unwind quickly. In contrast to previous price surges fueled by derivatives speculation, this rally appears to be more sustainable as it reflects genuine demand rather than speculative activity.

The reduction in open interest also suggests that excessive leverage has been flushed out of the system, potentially lowering the risk of a sharp liquidation cascade. This is a healthier market structure, as it means that if the price corrects, the forced selling pressure from liquidations could be less severe.