Bitcoin crossed $100,000 last week for the first time since February, powered by a rapid expansion in derivatives activity that set new records for open interest, funding rates, and short liquidations. The move unfolded within a market increasingly reliant on leveraged structures rather than spot-driven flows, setting up a potentially fragile foundation if momentum stalls.
Open interest across all Bitcoin derivatives reached $33.3 billion on May 12, up from $21.2 billion on April 11. This 57% rise marks one of the year’s fastest open interest expansions.
The derivatives build-up was accompanied by a substantial shift in perpetual funding rates, which climbed from an average of 0.23% per day in late April to 0.84% once Bitcoin breached $100,000. Daily carry costs briefly topped 1% on May 11, an extreme historically preceding near-term cooling periods.
Short liquidations served as the immediate catalyst for the breakout. On May 8, as Bitcoin pushed through $100,000, exchanges recorded $585 million in forced short covering. This was the largest single-day short liquidation event since Sep. 20, 2024.
The price surge wiped out traders betting against the rally and added mechanical buy pressure precisely where the spot price needed it most. The short squeeze created a vacuum above psychological resistance, allowing Bitcoin to close the day at $103,285. The intraday high later hit $105,772 on May 12.
Notably, this derivatives-fueled advance came just days after a sharp flush of overleveraged longs. On May 4, Bitcoin futures liquidated $102 million in long positions, the highest daily figure in over a month. The clean-out of long positions below $95,000 removed weak hands from the market, resetting leverage metrics before the upside thrust. This sequence (a long flush followed by a short squeeze) is textbook market structure behavior during aggressive directional shifts.
Spot volume also confirmed the scale of the move. On May 8, trading activity spiked to 45,875 BTC across major spot exchanges, the heaviest daily turnover since March 14, when ETF-driven inflows first boosted Bitcoin above $90,000. However, the bulk of the move was still derivatives-led, with ETF flows showing modest $1.1 billion net inflows between May 6 and May 9: supportive but not dominant.
CME’s share of Bitcoin open interest slipped slightly from 25% to 20% during this rally, suggesting that offshore venues with higher retail and high-frequency participation led the charge. This mirrors patterns seen during previous leverage-driven run-ups, where offshore derivatives crowds have historically driven both parabolic moves and their eventual retracements.
The core risk for the market now lies in the cost of this leverage. Funding rates above 1% daily are unsustainable in liquid, mature markets. Prior periods where Bitcoin’s funding exceeded 0.75% (in January and March) have preceded short-term pullbacks of 7% to 12% within a week. If the market fails to continue higher at the current velocity, crowded longs could face the same liquidation risk that wiped out shorts last week.
This shows Bitcoin’s weekend breakout was genuine in price terms but fragile in structure. Leverage continues to climb, but spot demand has not expanded proportionally. If funding remains elevated while price stagnates or falls back below $100,000, the market could see a rapid deleveraging cycle that compresses prices quickly. Conversely, if ETF inflows and spot buying pick up over the next few sessions, Bitcoin could stabilize above $100,000 and extend its rally with a healthier foundation.
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