Bitcoin Derivatives Heat Up as Open Interest and Funding Rates Climb Into Year End

Crypto derivatives activity is rising fast as traders position for a large Bitcoin move before the year closes. Data from Glassnode shows a clear pickup in leverage as price tested higher levels earlier this week.

Perpetual open interest climbed from 304,000 BTC to 310,000 BTC as Bitcoin briefly touched $90,000 on Dec. 22. The increase points to fresh positions entering the market rather than simple price follow through. At the same time, the funding rate moved higher, rising from 0.04% to 0.09%, indicating growing demand for long exposure.

Glassnode said the combination of rising open interest and higher funding shows traders are adding leveraged long positions ahead of a possible year end move. Bitcoin perpetuals are futures contracts with no expiry that track spot price through funding payments exchanged between long and short traders.

Bitcoin has since failed to hold above $90,000 and is trading near $87,600 at the time of writing. The pullback shows that while leverage has increased, price follow through remains limited for now.

Funding Rates Point to Crowded Longs

Rising Bitcoin funding rates mean traders holding long positions are paying a premium to stay in their trades. This usually happens when perpetual prices trade above spot and bullish positioning dominates. While this setup favors upside continuation in strong trends, it also raises risk if price stalls or reverses.

When funding climbs too quickly, liquidations can follow if price moves against crowded longs. With Bitcoin unable to push cleanly above $90,000, traders are watching whether leverage begins to unwind or continues to build into the final days of the year.

Open interest expansion without strong price gains often leads to sharp moves once direction is resolved. That resolution may come from derivatives flows rather than spot demand.

Options Expiry Adds Pressure

Volatility risk is also rising due to a major Bitcoin options expiry scheduled for Dec. 26. More than $23 billion in notional value will expire, making it one of the largest options events on record. End of quarter and end of year expiries tend to be much larger than regular cycles.

Deribit data shows call options clustered around $100,000 and $120,000, while put options are concentrated near $85,000. The put to call ratio sits at 0.37, meaning long contracts heavily outweigh short ones.

Max pain is currently near $96,000, based on Coinglass data. With Bitcoin trading well below that level, many call options are at risk of expiring worthless. The roughly $7,500 gap to max pain shows that bullish positioning has pushed far ahead of spot price.

If Bitcoin fails to move higher into expiry, losses will be realized quickly.