Bitcoin Open Interest Falls to Two-Year Low as Retail Investors Panic Over Shift From Traditional Finance

▲ Bitcoin (BTC) Decline / Image generated by ChatGPT

Open interest in the Bitcoin (BTC) futures market has plunged to its lowest level since 2024, delivering a major shock to the market and signaling a withdrawal of traditional financial capital.

According to crypto-focused outlet Cointelegraph on February 13 (local time), Bitcoin's open interest has sharply declined, recording its lowest level in nearly two years. Open interest represents the total number of outstanding futures and options contracts in the market, and a decline in this figure indicates both reduced liquidity and waning investor interest. Notably, the drop has retreated to levels last seen in early 2024, intensifying speculation that institutional investors may be pulling out.

Market data analysis shows that Bitcoin open interest has shed tens of billions of dollars from its peak, reflecting a rapid cooling of speculative energy. While Traditional Finance (TradFi) capital flowed aggressively into Bitcoin following the launch of spot ETFs, recent macroeconomic uncertainty and mounting regulatory pressures appear to be driving capital outflows. A sharp decline in open interest suggests a weakening buyer base capable of supporting price volatility, thereby increasing downside pressure.

Experts suggest this development signals a structural shift in the Bitcoin market. Unlike in the past when retail investors dominated trading activity, institutional capital now exerts overwhelming influence, making the withdrawal of open interest by these players a potential warning sign of prolonged market stagnation. On-chain analytics firms such as Santiment noted that capital is exiting the derivatives market faster than expected, describing it as growing pains in Bitcoin’s process of fully establishing itself as an independent asset class within traditional financial markets.

Market opinions are divided over whether traditional financial capital is truly exiting. Some analysts argue that institutional investors are reducing their exposure to risk assets and prioritizing Bitcoin for liquidation. Others contend that the decline in open interest represents a healthy correction that flushes out excessive leverage, potentially laying a stronger foundation for future gains once liquidity returns. However, current indicators suggest there is insufficient momentum to counter additional capital outflows.

With open interest at multi-year lows, the Bitcoin market now faces the challenge of identifying new sources of liquidity. Unless capital from traditional finance flows back into Bitcoin, the market is likely to experience prolonged sideways movement or further declines amid subdued trading volumes. Investors are maintaining a cautious stance, closely watching for signs of recovery in futures market indicators.

Disclaimer: This article is for investment reference purposes only and the publisher assumes no responsibility for any investment losses incurred based on this information. The content should be interpreted solely for informational purposes.