Bitcoin’s derivatives market is showing weaker demand for leveraged positions, with futures open interest falling close to its lowest level of the year. At the same time, traders who remain positioned in the market appear increasingly willing to bet on further declines.
Open interest stood at about 652,000 BTC at the time of writing, down from a peak of approximately 800,000 BTC reached earlier this year, according to CoinGlass.
The decline indicates that traders have reduced their exposure to leveraged bitcoin trades, even after the cryptocurrency gained roughly 40% during the third quarter.
Short Sellers Pay to Maintain Positions
Perpetual futures funding rates have moved back below zero, averaging around minus 0.3% across major exchanges.
Funding rates help show which side of the derivatives market is driving demand. Although every long position has a corresponding short, negative funding means short traders are paying long holders to keep their positions open.
That dynamic suggests that bearish traders are currently more aggressive and willing to absorb the funding cost associated with maintaining short exposure.
Bitcoin’s derivatives positioning shifted after the cryptocurrency dropped about 2% to $82,800 over a 24-hour period. The decline came after President Donald Trump said he would not rule out further strikes against Iran before the U.S. midterm elections.
Bitcoin remains more than $20,000 above its summer cycle low, however, and is still the top-performing asset of the third quarter.
Gold Slides Alongside Bitcoin
The weakness has extended beyond crypto markets, with gold also posting a sharp decline.
Gold has fallen about 3% over the past 24 hours and is trading near $4,150 an ounce. Meanwhile, the bitcoin-to-gold ratio is nearing 20, a level that would put the measure close to turning positive for the year.
The dollar has strengthened at the same time. The DXY index has moved above 101 as U.S. Treasury yields continue to climb.
The 10-year Treasury yield is now above 5.2%, while the 30-year yield has surpassed 5.51%.
Rising Treasury Yields Add Pressure
A stronger U.S. economy could be helping lift both the dollar and Treasury yields, although persistent inflation concerns may also be contributing to higher borrowing costs.
As yields rise, prices of existing bonds generally decline. TLT, an ETF focused on long-duration U.S. Treasury securities, has dropped to around $79, its lowest level on record.
Higher yields can also make interest-bearing investments more attractive relative to assets such as bitcoin and gold, which do not generate income for holders.
