In the labyrinthine world of cryptocurrency, notional open interest in Bitcoin (BTC) futures and perpetual futures—a vital barometer of market sentiment—has plunged approximately 18%, plummeting from $37 billion to $30.2 billion within a month. This descent parallels a 14% downturn in the cryptocurrency’s spot market price, as reported by Coinglass.

At first blush, these figures suggest a liquidation of long positions, or bullish leveraged bets, which anticipated a price surge over the past four weeks. In essence, the drop in BTC’s price is seemingly amplified by the unwinding of these optimistic bets.

However, this interpretation, while partially accurate, obscures the bullish undercurrents rippling through the market.

Open interest signifies the quantity of active or open contracts at any given moment. Notional open interest is calculated by multiplying the number of units in a single contract by its current spot market price. Consequently, fluctuations in the asset price affect notional open interest even if the total number of contracts remains unchanged, potentially offering a distorted view of market dynamics.

Such is the scenario within the BTC market. According to Coinglass, open interest has maintained a steady position above the 500,000 BTC threshold over the past four weeks. Concurrently, perpetual funding rates, levied by exchanges every eight hours, have consistently remained positive, indicating a predilection for bullish wagers.