The Bitcoin deleveraging cycle continues, but the cyclical bottom has not yet formed

The Bitcoin market is undergoing a gradual redefinition, with investors progressively reducing their leveraged positions. However, the leading digital asset has not yet reached the typical bottom of a bear market cycle, despite increasingly clear signs of caution. Data from the analysis platform CryptoQuant reveal that both the decline in open interest and the compression of the basis on the Chicago Mercantile Exchange (CME) confirm an ongoing deleveraging process. With Bitcoin rising 3.23% in the last 24 hours, these technical dynamics become even more relevant for understanding the market’s true state.

CME Basis Reveals Gradual Weakening of Leverage Demand

The CME basis functions as an indicator of demand for leveraged exposure. It is calculated from the difference between futures prices and spot prices, reflecting how much speculative traders are willing to pay for leverage. Since the start of 2025, this curve has shown a continuous compression trend, similar to the pattern observed just before the major drops in 2019 and 2022.

Although the slope remains positive so far, the current scenario already signals weakened bullish convictions. Longer-term contracts still trade at a premium over spot and short-term futures, but the gap between them is narrowing. This indicates that demand for long leveraged exposure is decreasing, reflecting growing risk aversion among market participants.

Historically, cyclical fund formations only occurred when this curve fully inverted, entering backwardation and signaling sharp deleveraging. Since this has not yet happened, Bitcoin likely has more downside until genuine capitulation conditions appear.

Futures Volume Down 47%: The Unwinding of Positions in Numbers

Bitcoin’s open interest on CME futures has fallen 47% from its peak in 2025, a move almost identical to that seen during the 2022 bear market, when the reduction was 45%. This metric is crucial because it reflects the total amount of open, unsettled contracts, serving as a thermometer of speculative activity.

The sharp decline in open interest reveals that traders are systematically and continuously closing leveraged positions after a period of increased market participation. This process occurs gradually through prolonged liquidations, reduced speculative demand, and lower hedging activity, confirming a continuous cycle of adjustments.

The combination of declining open interest and a still-positive yield curve suggests that the current regime remains consolidative or bearish within a mid-cycle. A more definitive and sharp capitulation is likely to occur soon, when retail followers and speculators finally accept losses and exit the market.

When Will the Cyclical Bottom Arrive?

Available data points to a scenario where the deleveraging cycle continues to evolve but has not yet reached a critical inflection point. CME’s technical metrics and futures volume demonstrate that the market is undergoing a controlled position redefinition, rather than a sharp panic that marks historical cyclical bottoms.

This gradual transition can represent either an opportunity or a warning, depending on the investor’s perspective. The bottom will be confirmed when the CME basis finally inverts into full backwardation, signaling that even the most optimistic have been forced to exit. Until then, consolidation continues, and Bitcoin may face resistance in future price recoveries.