Bitcoin has climbed from about $62,000 to nearly $80,000 in just a week, posting its second-biggest weekly gain of the past five years. A rally of this scale would normally be accompanied by increased leverage as traders turn to futures to amplify potential profits.

But the current move has followed a different pattern. The surge appears to have been driven more by short sellers unwinding bearish positions than by a rush of new long bets.

Futures open interest (OI) offers a clear indication of this shift. Bitcoin-denominated OI has dropped to roughly 587,584 BTC, its lowest level in almost five months, down from 645,760 BTC on Aug. 14, Glassnode data shows. Measuring OI in BTC terms provides a cleaner assessment of positioning by removing the effect of Bitcoin’s higher dollar price.

In effect, Bitcoin has rallied while futures exposure has contracted. Short sellers have either closed positions by repurchasing contracts or faced forced liquidations after their margin fell below required levels.

Those liquidations erased billions of dollars in short positions, fueling a short squeeze that helped Bitcoin break above $80,000.

Funding rates in perpetual futures also indicate that traders have not taken on excessive bullish leverage. Annualized rates have remained below 10%, pointing to relatively moderate long demand. A major influx of leveraged buyers would typically push funding rates substantially higher.

Falling Leverage Offers a Positive Signal

The reduction in derivatives exposure could be constructive for Bitcoin because a less leveraged market is generally less vulnerable to sudden, violent reversals.

The decline is especially notable in crypto-backed futures. According to Glassnode, open interest in futures collateralized by BTC or other cryptocurrencies has fallen to an all-time low of about 52,000 BTC, or only 11% of total market activity.

The growing use of cash-margined futures can also limit liquidation cascades. Cash collateral does not decline in value simply because Bitcoin falls, whereas crypto collateral loses value during a sell-off. This can otherwise create a cycle in which falling prices weaken collateral, trigger forced liquidations and intensify market losses.

The shift away from crypto-backed leverage may help explain why Bitcoin’s volatility has gradually moderated in recent years.