Bitcoin’s futures pile has a problem: less cash to fuel a rebound

DWF Labs' Martin Lee noted that Bitcoin futures open interest stood at 704,000 BTC this week, the highest since Sept. 24, while spot market liquidity continued to thin.

Meanwhile, the Treasury's $25 billion 30-year bond auction on Nov. 12 drew a 2.36 bid-to-cover ratio, down from 2.54 in October, and cleared at 5.441% against a 5.437% when-issued yield, a 0.4-basis-point tail.

The 10-year sale two days earlier showed a sharper slide, with bid-to-cover at 2.46 against 2.77 in October.

The 10-year cleared at 5.02%, with indirect bidders taking about 61.2% of competitive awards versus 80.3% in October, and dealers taking 9.8% versus 2.5%. The 3-year sale on Nov. 9 drew 2.53 against 2.62.

The 30-year result sits within the range of recent sales, since August's new issue drew 2.39. The Treasury said on Nov. 4 that demand for short-term bills remained strong, so the auctions show weaker appetite for duration, and a retreat from US debt would be a larger claim.

Treasury expects $618 billion of privately held net borrowing in October through December and $800 billion in January through March. The $125 billion in 3-, 10-, and 30-year refunding sales raises about $28 billion in new cash.

Two-year yields near 4.835% and 10-year yields near 5.068% on Nov. 12 make cash and government debt more competitive with Bitcoin.

Two sources of liquidity for Bitcoin

Lee describes dollar-debasement demand and broader risk-on flows as two supports for Bitcoin in past rallies. Both helped in the 2020 to 2022 cycle, and in August the debasement narrative let Bitcoin hold up while AI stocks corrected.

He shared in a note:

“The limitation is that debasement alone rarely sustains a rally when the broader market is risk-off.”

He sees little chance of liquidity rotating into crypto until uncertainty from the midterms and a near-certain December hike clears. Adoption continues, with Airwallex launching its own chain and the NYSE advancing a tokenized stock platform.

Lee said Bitcoin options open interest recovered to 447,000 BTC from a dip between Nov. 6 and Nov. 9, though it remains 5% to 10% below October. Bitcoin's futures open interest is about 12% below its 2026 high, while Ethereum's is down about 30% since May and Solana's about 23% since June.

At an illustrative $72,000, 704,000 BTC equals about $51 billion of gross notional. Open interest counts outstanding contracts with a buyer and a seller on each, so it mixes long bets, short bets and hedges, and it describes positioning, a measure separate from fresh capital.

Glassnode noted on Nov. 11 that open interest had rebuilt toward September levels while Bitcoin sat about 15% below its September high, a pattern consistent with traders adding shorts during the decline.

Futures can amplify a rebound through short covering or a decline through forced closures, and both routes depend on spot liquidity.

The spot evidence

Glassnode’s Nov. 11 analysis found resting bids within 5% of price outweighing asks on Binance and Coinbase since Nov. 5, with the largest concentration between $68,000 and $72,500.

Wallets holding 100 to 1,000 BTC and 1,000 to 10,000 BTC are accumulating, and other cohorts are distributing. A resting bid shows willingness to buy, and whether purchases follow depends on the bid surviving, since bids can be pulled or overwhelmed.

Bitcoin fell below $72,000 on Nov. 12 with an intraday low near $71,255, entering the top of that band.

About 35% of short-term holder supply is in profit, and Bitcoin trades below the $75,600 short-term holder cost basis. CryptoQuant reported profitable supply falling from more than 15 million BTC to about 11 million.

The 30-day average Coinbase premium is negative, with the deepest discount since February. Stablecoin supply contracted $14 billion in 30 days, the fastest since June 2022.

Farside Investors showed about $2 billion of US spot ETF outflows from Nov. 2 through Nov. 11, including $300 million on Nov. 11.

Where Bitcoin could go from here

Lee argued:

“We've seen outflows accelerate at the bottoms and inflows accelerate at the tops.”

DWF Labs' Oct. 22 study of 694 trading days found ETF flows correlated 0.54 with Bitcoin's prior five-day return and 0.03 with its next five-day return. Flows turned negative on the low day in seven of eight qualifying selloffs and positive on the peak day in seven of eight tops.

About 20% of ETF buying was historically tied to CME short hedges.

Glassnode puts the True Market Mean near $77,500, a modeled six-month liquidation concentration at $59,500 to $62,600, a June low near $58,500 and a short-liquidation cluster near $87,500.

A recovery would have stronger backing if buyers absorb selling in the $68,000 to $72,500 band, Bitcoin reclaims $75,600 and $77,500, the Coinbase premium turns positive and stablecoin supply resumes growing. That combination could make futures positioning fuel for a rebound.

If bids give way while holder profitability erodes and stablecoin supply keeps contracting, leveraged positions could amplify a decline. Glassnode’s modeled $59,500 to $62,600 zone marks a possible area of liquidation pressure, not a price target.