On February 9th, even after Bitcoin rallied to near $70,000, its derivatives market continued to send warning signals. Traders maintained defensive positions, and there were few signs of new long positions being placed.
The funding rate (the fee paid between long and short holders) for Bitcoin perpetual contracts remains below zero, a bearish pattern that suggests traders are still positioning for a downside or demanding compensation before holding long positions.
Meanwhile, open interest in Bitcoin perpetual futures has failed to recover since it began declining last October, highlighting a lack of confidence in the recent rebound. Coinglass data shows that current open interest is down 51% from its October peak.
Despite Bitcoin's rebound from near $60,000 to around $70,000, open interest showed no signs of recovery on Monday. "Since the market crash on October 10th, liquidity and market depth have decreased significantly, prompting people to reduce leverage and adopt more conservative strategies," said Andy Martinez, CEO of Crypto Insights Group. "I think the market is still trying to understand everything that has happened since October 10th."
Griffin Ardern, Head of Research and Options Trading at BloFin, stated that the options market is telling a similar story. Bitcoin's implied volatility has dropped significantly from around 83% last Thursday to around 60% currently, indicating a reduced market expectation of significant near-term price volatility. However, positioning indicators remain defensive. The 25-delta call-put skew (a measure of whether fear or greed dominates option pricing) remains heavily biased towards put options, indicating strong market demand for downside protection.
"The impact of leverage on market prices has significantly decreased, which helps reduce volatility and stabilize prices," Ardern added. "But this also means that many investors are taking profits or cutting losses at relatively low levels, moving to a wait-and-see approach, or even temporarily leaving the market." He further pointed out that a market dominated by bearish sentiment usually means consolidation rather than a rapid rebound.
A packed macroeconomic schedule has also reinforced market caution. "Although the market seemed to find support late last week, participants remain extremely cautious due to a multitude of potential market-moving events," said Le Shi, Managing Director of Auros Hong Kong. He cited risks including developments in the Japanese political situation, volatility in the precious metals market, and concerns about artificial intelligence driving the stock market rally.
