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Declining crypto margin futures signals move towards stable collateral
Onchain Highlights
DEFINITION: The percentage of open interest of margined futures contracts in the native currency (e.g., BTC) and not in USD or a USD-pegged stablecoin.
The Bitcoin futures market is undergoing a notable shift, as reflected in the declining percentage of open interest on crypto margin futures across all exchanges. Data from Glassnode highlights a significant decline in the use of Bitcoin as collateral for futures contracts, dropping from 70% in early 2021 to less than 20% by mid-2024.
Percentage of Open Interest Futures with Crypto Margin: (Source: Glassnode)
This trend suggests a growing preference for more stable forms of collateral, such as USD or stablecoins, over Bitcoin itself. The rationale behind this change is to mitigate the overall risks associated with Bitcoin price volatility, which can lead to increased liquidations during market swings. This shift towards stability and risk mitigation signals a maturation of the market, where traders are adopting strategies to manage volatility more effectively.
Additionally, the futures market’s response to Bitcoin’s price stabilizing around $70,000 points to an evolving landscape where open interest is rising sharply. starting to recover. This recovery in open interest, combined with the continued shift towards stable collateral, highlights the changing behavior of traders market forces.