Bitcoin Derivatives Market Sees 26% Decline in Open Interest Amid Geopolitical Tensions

Bitcoin derivatives markets experienced a significant contraction in open interest, marking the sharpest decline since the August 2024 yen-led global market crash. This decline brought total notional open interest below 260,000 BTC, a level unseen since early May. The rapid deleveraging reflects traders’ cautious stance as geopolitical tensions, particularly surrounding the Iran-Israel ceasefire, continue to weigh on market sentiment.

Despite Bitcoin’s price rebound above $105,000, traders remain cautious amid geopolitical tensions and upcoming futures expirations. The Fear & Greed Index, while indicating moderate greed at 65, suggests that market participants are hesitant to increase risk exposure amid ongoing uncertainties. The juxtaposition of price gains with declining open interest highlights a market in flux, balancing optimism with caution.

With the monthly Bitcoin futures expiry scheduled for Friday, June 27, market participants are closely monitoring derivatives positioning. Monthly expirations often catalyze volatility as traders adjust or close positions. However, current data from the Bitcoin Volatility Index shows a decline to 39.15—the lowest since October 2023—indicating subdued expected price swings. This low volatility environment suggests a temporary stabilization, though geopolitical headline risks remain a wildcard.

Analysis from Wintermute’s OTC desk reveals that options flows are currently skewed neutral, with straddle and call selling clustered around the $105,000 strike and short puts positioned at $100,000 for the June 27 expiry. This positioning implies that traders anticipate Bitcoin to hover near the $105,000 level in the short term. Notably, while implied volatility on short-dated contracts remains elevated due to geopolitical tensions, longer-dated options expiring in July and September show emerging bullish sentiment, indicating expectations for reduced uncertainty in the medium term.

The broader equity markets mirrored Bitcoin’s cautious optimism, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all posting gains exceeding 1% amid easing geopolitical concerns. However, attention will likely shift toward domestic U.S. fiscal policies, including President Trump’s budget and tariff announcements, which could introduce new headline risks. Traders are advised to remain vigilant as these macroeconomic factors may influence Bitcoin’s price trajectory and derivatives market behavior in the coming weeks.

Bitcoin’s derivatives market is currently navigating a phase of reduced leverage and cautious positioning, driven by geopolitical uncertainties and the impending futures expiry. While price action shows resilience with a rebound above $105,000, the sharp decline in open interest underscores a collective de-risking among traders. The evolving options market sentiment suggests that while short-term volatility remains subdued, medium-term optimism is building. Investors should monitor upcoming macroeconomic developments closely, as these will likely shape Bitcoin’s market dynamics beyond the immediate horizon.