Review and Outlook of the Cryptocurrency Derivation Market in the First Half of 2025

In the first half of 2025, the global macro environment continued to be turbulent. The Federal Reserve paused interest rate cuts multiple times, reflecting that monetary policy has entered a "wait-and-see tug-of-war" phase, while escalating geopolitical conflicts further tore apart the global risk appetite structure. Meanwhile, the cryptocurrency derivation market continued the strong momentum seen at the end of 2024, with the overall scale reaching new highs. After BTC broke through the historical high of $111,000 at the beginning of the year and entered a consolidation phase, the global BTC derivative open interest saw a significant increase, with the overall open interest jumping from about $60 billion to over $70 billion by June. As of June, although the BTC price remained relatively stable around $100,000, the derivation market experienced multiple rounds of long and short reshuffling, and the leverage risk was somewhat released, indicating a relatively healthy market structure.

Looking ahead to the third and fourth quarters, it is expected that the derivation market will continue to expand in scale under the influence of the macro environment (such as changes in interest rate policy) and the drive of institutional funds, with volatility likely to remain convergent. At the same time, risk indicators need to be continuously monitored, maintaining a cautiously optimistic attitude towards the continued rise in BTC prices.

1. Market Overview

Market Overview

In the first and second quarters of 2025, the price of BTC experienced significant fluctuations. At the beginning of the year, the price of BTC reached a high of $110,000 in January, then fell to about $75,000 in April, a drop of about 30%. However, with the improvement in market sentiment and the continued interest of institutional investors, the price of BTC rose again in May, reaching a peak of $112,000. As of June, the price stabilized around $107,000. At the same time, BTC's market share continued to strengthen in the first half of 2025, with data platforms showing that BTC's market share reached 60% at the end of the first quarter, the highest level since 2021. This trend continued into the second quarter, with market share exceeding 65%, indicating investors' preference for BTC.

At the same time, institutional investors' interest in BTC continues to grow, with a sustained inflow trend in BTC spot ETFs, and the total assets under management of these ETFs have exceeded $130 billion. In addition, some global macroeconomic factors, such as the decline of the dollar index and distrust in the traditional financial system, have also boosted the appeal of BTC as a store of value.

In the first half of 2025, the overall performance of ETH was disappointing. Although the price of ETH briefly reached around $3,700 at the beginning of the year, it soon experienced a significant decline. By April, ETH had dropped below $1,400, a decline of over 60%. The price rebound in May was limited, and even with the release of technical benefits (such as the Pectra upgrade), ETH only rebounded to about $2,700, failing to recover the early year's high. As of June 1, the price of ETH stabilized around $2,500, down nearly 30% from the early year's high, showing no strong signs of sustained recovery.

The divergence trend between ETH and BTC is particularly evident. Against the backdrop of BTC's rebound and the continuous rise in market dominance, ETH not only failed to rise in tandem but instead showed significant weakness. This phenomenon is reflected in the substantial decline of the ETH/BTC ratio, dropping from 0.036 at the beginning of the year to a low of approximately 0.017, a decrease of over 50%. This divergence reveals a significant decline in market confidence in ETH. It is expected that in the third to fourth quarters of 2025, with the approval of the ETH spot ETF staking mechanism, market risk appetite may rebound, and overall sentiment is likely to improve.

The overall performance of the altcoin market is even more pronouncedly weak. Data shows that some mainstream altcoins, represented by Solana, briefly surged at the beginning of the year but subsequently experienced continuous corrections. SOL fell from a high of about $295 to a low of about $113 in April, a decline of over 60%. Most other altcoins (such as Avalanche, Polkadot, ADA) also generally exhibited similar or greater declines, with some altcoins even dropping more than 90% from their highs. This phenomenon indicates an increased risk aversion sentiment in the market towards high-risk assets.

In the current market environment, BTC's position as a risk-averse asset has been significantly strengthened, with its attributes shifting from "speculative commodity" to "institutional allocation asset/macroeconomic asset," while ETH and altcoins still primarily represent "encryption native capital, retail speculation, and DeFi activities," making their asset positioning more akin to tech stocks. The ETH and altcoin markets have shown continued weakness due to reduced funding preferences, increased competitive pressure, and the impact of macroeconomic and regulatory environments. Apart from a few public chains (like Solana) that continue to expand their ecosystems, the overall altcoin market lacks significant technological innovation or new large-scale application scenarios to effectively attract sustained investor attention. In the short term, constrained by macro-level liquidity, if the ETH and altcoin markets do not have new strong ecological or technological drivers, it will be difficult to significantly reverse the weak trend, and investor sentiment towards altcoins remains cautious and conservative.

BTC/ETH derivation positions and leverage trends

The total open interest of BTC contracts reached a new high in the first half of 2025, driven by massive funds flowing into spot ETFs and strong demand for futures. The open interest of BTC futures further climbed, briefly surpassing $70 billion in May this year.

It is worth noting that the market share of traditional regulated exchanges such as CME is rapidly increasing. As of June 1, data shows that CME's BTC futures open interest reached 158,300 BTC (approximately $16.5 billion), ranking first among exchanges, surpassing a certain trading platform's 118,700 BTC (approximately $12.3 billion) during the same period. This reflects that institutions are entering the market through regulated channels, with CME and ETFs becoming important increments. A certain trading platform still has the largest open interest in the cryptocurrency exchange market, but its market share is being diluted.

In terms of ETH, similar to BTC, its total open interest reached a new high in the first half of 2025, surpassing 30 billion USD in May this year. As of June 1, data shows that the open interest for ETH futures on a certain trading platform reached 2.354 million ETH (approximately 6 billion USD), ranking first among all exchanges.

Overall, in the first half of the year, the leverage usage among exchange users has tended to be rational. Although the total market open interest has risen, multiple violent fluctuations have cleared excessive leveraged positions, and the average leverage ratio of exchange users has not spiraled out of control. Especially after the market fluctuations in February and April, the exchange's margin reserves are relatively ample, and although the leverage ratio indicators for the entire market occasionally reached high points, they did not show a sustained upward trend.

CoinGlass derivation index ( CGDI ) analysis

CoinGlass Derivatives Index, hereinafter referred to as "CGDI", is an index that measures the price performance of the global encryption derivatives market. Currently, over 80% of the trading volume in the encryption market comes from derivation contracts, while mainstream spot indices cannot effectively reflect the core pricing mechanism of the market. CGDI dynamically tracks the prices of the top 100 mainstream cryptocurrency perpetual contracts ranked by Open Interest and combines them with their Open Interest to construct a highly representative derivatives market trend indicator in real time.

CGDI showed a divergence trend with BTC prices in the first half of the year. At the beginning of the year, BTC rose strongly driven by institutional buying, maintaining its price near historical highs, but CGDI started to decline from February------the reason for this drop is the weakness in prices of other mainstream contract assets. Since CGDI is calculated based on the OI weighted by mainstream contract assets, while BTC stood out, ETH and altcoin futures failed to strengthen simultaneously, dragging down the overall index performance. In short, in the first half of the year, funds clearly concentrated on BTC, which remained strong mainly supported by institutional long-term accumulation and the spot ETF effect, resulting in an increase in BTC's market share, while the speculative enthusiasm in the altcoin sector cooled down and funds flowed out, leading to a decline in CGDI while BTC prices remained high. This divergence reflects a change in investor risk appetite: favorable ETF news and safe-haven demand led to a surge of funds into high market cap assets like BTC, while regulatory uncertainty and profit-taking put pressure on secondary assets and the altcoin market.

CoinGlass derivation risk index ( CDRI ) analysis

CoinGlass Derivatives Risk Index (CDRI) is an indicator that measures the intensity of risk in the cryptocurrency derivatives market, used to quantify and reflect the current level of leverage usage, trading sentiment, and systemic liquidation risk. CDRI focuses on proactive risk warnings, issuing alerts in advance when market structure deteriorates, indicating a high-risk state even if prices continue to rise. This index constructs a risk profile of the cryptocurrency derivatives market in real-time through weighted analysis across multiple dimensions, including open interest, funding rates, leverage multiples, long-short ratios, contract volatility, and liquidation volumes. CDRI is a standardized risk scoring model with a range from 0 to 100; the higher the value, the closer the market is to overheating or a fragile state, making it prone to systemic liquidation events.

The CoinGlass Derivation Risk Index (CDRI) has generally remained at a slightly higher than neutral level in the first half of the year. As of June 1st, the CDRI is at 58, within the "medium risk/volatility neutral" range, indicating that the market is not showing significant overheating or panic, and short-term risks are manageable.

2. Cryptocurrency Derivation Data Analysis

analysis of perpetual contract funding rates

The change in the funding rate directly reflects the use of leverage in the market. A positive funding rate usually indicates an increase in long positions, and market sentiment is bullish; while a negative funding rate may suggest rising short pressure, and market sentiment turns cautious. The fluctuations in the funding rate remind investors to pay attention to leverage risks, especially when market sentiment changes rapidly.

In the first half of 2025, the overall perpetual contract market showed a bullish trend, with the funding rate being positive most of the time. The funding rates for major crypto assets remained positive and above the benchmark level of 0.01%, indicating a generally bullish market sentiment. During this period, investors held an optimistic view of the market outlook, which drove an increase in long positions. As long positions became crowded and profit-taking pressure intensified, BTC experienced a rise and subsequent pullback in mid to late January, and the funding rate returned to normal.

Entering the second quarter, market sentiment has rationally returned, with the funding rate from April to June mostly staying below 0.01% (annualized around 11%), and in some periods even turning negative. This indicates that the speculative frenzy has subsided, and long and short positions are tending to balance. According to data, the number of times the funding rate turned from positive to negative is very limited, suggesting that the points of concentrated outbreak of bearish sentiment in the market are not many. In early February, when news of Trump’s tariffs triggered a sharp drop, the BTC perpetual funding rate briefly turned negative, indicating that bearish sentiment reached a local extreme. In mid-April, when BTC quickly fell to around $75,000, the funding rate again briefly turned negative, showing that panic sentiment led to a gathering of short positions. In mid-June, geopolitical shocks caused the funding rate to fall into negative territory for the third time. Aside from these extreme cases, the funding rate maintained positive values for most of the first half of the year, reflecting a long-term bullish tone in the market. The first half of 2025 continued the trend of 2024: the funding rate turning negative is a rare occurrence, with each instance corresponding to a dramatic reversal in market sentiment. Therefore, the number of switches between positive and negative rates can serve as a signal of sentiment reversal—this year in the first half, the few switches precisely indicated the emergence of turning points in the market.

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