Bitcoin’s Futures Market Sees Major Deleveraging

Key Developments

• Bitcoin’s Futures market experienced over $10 billion in Open Interest erased.
• CME Open Interest fell 45% from December 18 to March 18.

Bitcoin’s [BTC] Futures market is currently witnessing one of its largest deleveraging phases, with over $10 billion in Open Interest eliminated since January 2025, where it peaked at $33 billion on January 17. According to a CryptoQuant analyst, this was an all-time high in market leverage.

Between February 20 and March 4, Open Interest retraced $10 billion, driven by uncertainties from both national and international political events and widespread liquidations. Analysts from CryptoQuant describe this time as a natural market reset, historically preceding bullish trends.

Historical Context: March 2024

A similar scenario occurred in March 2024 when Bitcoin sharply retracted from $69,000 to $59,700, resulting in a $1 billion exit from leveraged positions. This correction normalized Funding Rates across major cryptocurrencies and set the stage for a sustained rally later that year.

Historically, deleveraging cycles align with external economic factors and geopolitical issues, further intensifying market reactions. The latest wave of deleveraging has been influenced by geopolitical tensions and ongoing macroeconomic changes, complicating market dynamics.

Notably, recent remarks from Donald Trump regarding cryptocurrency have also contributed to market reactions.

Bitcoin’s Price Dynamics

By late February, Bitcoin Futures Open Interest fell below $60 billion, down from $70 billion in January per Coinglass data. Specifically, from December 2024 to March 2025, Bitcoin’s Open Interest declined from $13.70 billion to $8.86 billion—a 35% decrease that coincided with a 20% drop in Bitcoin’s price, implying that December’s rally was driven by excessive leverage.

Trends in Funding Rates

Funding Rate trends confirm Bitcoin’s ongoing deleveraging. From December to March, Funding Rates transitioned from strongly positive to negative, indicating a shift from bullish to bearish sentiment. Rates reached a peak on February 3, coinciding with Bitcoin’s price of $101,440, then fell to -0.00554 by March 2, indicating that traders were either closing leveraged positions or facing liquidations.

This decline mirrors the March 2024 Funding Rate reset, where rates fell drastically, signaling an end to an overheated futures market. As Funding Rates reset, Open Interest data further illustrates how capital exited leveraged positions.

Institutional Trader Response

Institutional traders mirrored this deleveraging pattern, with CME Bitcoin Futures showing a 45% drop in leveraged exposure from $22.71 billion on December 18 to $12.50 billion by March 18, corresponding with Bitcoin’s price drop to $82,785. Analysis of broader Funding Rates supports the deleveraging theory.

On March 11, aggregated Funding Rates escalated to +0.4984, indicating an overheated market, before rapidly reversing to -0.0263 by March 18.

Future Outlook: Reset or Reversal?

Despite recent declines, analysts are optimistic about a potential bullish recovery. Bitcoin’s $10 billion deleveraging is noted as one of the largest resets in over a year. With Funding Rates stabilizing and Open Interest normalizing, traders are vigilantly searching for accumulation signals, anticipating a bullish trend in Q2 2025. Historical patterns suggest that such resets typically lead to long-term recoveries.