The bitcoin (BTC) derivatives market has undergone a significant structural change in the past 18 months, making the asset class less vulnerable to volatility-inducing liquidation cascades.
The cash-margined contracts, which require traders to deposit the U.S. dollar or dollar-linked assets like stablecoins as collateral to take leveraged bets, now account for a record 65% of the total open positions (or open interest) in the BTC futures market, according to data tracked by analytics firm Glassnode.
That's significantly higher than the 30% seen in April 2021 when the crypto-margined contracts dominated the futures market activity. The crypto-margined contracts, also known as inverse contracts, require traders to deposit a cryptocurrency as collateral. According to Glassnode, the growing popularity of cash-margined contracts represents an improvement in the health of the derivative collateral structure.
"This acts to reduce the probability of an amplified liquidation cascade while...
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