What Crypto Derivatives Say About Bitcoin’s Record Price

Bitcoin is on the rise. 

But is it sustainable, and how are sophisticated traders looking to protect recent gains following Thursday’s more than 6% pop above $117,500?

Cracks are beginning to form in the derivatives market, according to analysts Decrypt spoke to on Thursday, which came amid a drop of more than $1.58 billion in open interest.

More than $1 billion worth of positions were liquidated from the crypto market as Bitcoin’s price hit new highs on Thursday, Decrypt previously reported.

Out of that total, $963 million were short positions, showing how badly sellers were caught offside during Thursday’s rally. The forced liquidation of those shorts prompted a sharp reduction in open positions, contributing to a major slide in open interest.

Open interest refers to the total number of outstanding derivatives contracts, including futures and perpetuals, that have not yet been settled. 

As a result of “short-covering rather than new inflows,” Bitcoin remains “fragile,” according to Wenny Cai, co-founder and COO of crypto derivatives platform SynFutures. 

Bitcoin’s aggregated spot order book at 2% depth lends weight to Cai’s cautious outlook, according to the latest figures from CoinGlass.

Since July 8, the book has remained ask-heavy, suggesting the recent price surge was fueled primarily by activity in perpetual futures rather than spot demand.

Funding rates on major centralized exchanges also remain low, Cai added, signaling “mild bullish sentiment” absent signs of “overheating.” She expects “momentum to wane in the near term without a new wave of inflows,” Decrypt was told.

Bitcoin’s advance follows signs of a weakening U.S. economy and a sliding dollar. The greenback has fallen 10.8% against a basket of major currencies this year, with the DXY index dropping to 96.37, its lowest level since early 2022.

A softer U.S. dollar, often a byproduct of looser monetary policy, has historically aligned with greater investor appetite for risk and stronger Bitcoin performance. 

Priced in dollars, Bitcoin can rise in nominal terms as the greenback weakens, even if its real value holds steady. Some argue that ongoing dollar debasement, driven by inflation or quantitative easing, enhances Bitcoin’s appeal as a digital alternative to gold.

In any case, Georgii Verbitskii, founder of DeFi platform TYMIO, told Decrypt that Bitcoin’s break above $112,000 is a strong signal and expects the uptrend to continue into the summer and early fall.

“We’re now seeing strong positioning in the options market,” he said. “As Bitcoin pushed through $113,000, open interest on Deribit concentrated heavily around $115,000 and $120,000 strike calls.”

Verbitskii notes that the market is leaning bullish with an uptick in interest in the $140,000 and $150,000 September and December contracts.