Bitcoin Open Interest Collapses to 12%. Is the Short Squeeze Over?
Bitcoin futures have shifted sharply away from crypto collateral. Only about 12% of BTC open interest is now crypto-margined, down from nearly 100% in 2019–2020, as traders increasingly prefer stablecoin-backed positions. The change matters because BTC-margined leverage creates a feedback loop: when Bitcoin falls, the collateral falls too, raising liquidation risk at the worst moment. Stablecoin margin holds its dollar value and is seen as a steadier backing for leveraged trades. This move reflects a more mature derivatives market and growing institutional participation, with more activity settling in dollars rather than coins. Recent market events also showed strong spot demand and a large short squeeze, but those liquidations were separate from the collateral shift. The main takeaway is that dollar margin has become the dominant structure, yet leverage remains leverage, so major liquidations can still happen.
