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

In the first half of 2025, the global macro environment continues to be turbulent. The Federal Reserve has repeatedly paused interest rate cuts, reflecting that its monetary policy has entered a "wait-and-see tug-of-war" phase, while the Trump administration's tariff increases and escalating geopolitical conflicts further tear apart the global risk appetite structure. Meanwhile, the cryptocurrency derivation market has continued the strong momentum from the end of 2024, with the overall scale reaching new highs. After BTC broke through its historical high of $111K at the beginning of the year and entered a consolidation phase, the global BTC derivation open interest (OI) has significantly increased, with the total open interest jumping from about $60 billion to over $70 billion by June. As of June, although the BTC price has remained relatively stable around $100K, the derivation market has experienced multiple rounds of long and short liquidations, leverage risks have been somewhat released, and the market structure is relatively healthy.

It is expected that in Q3 and Q4, the macro environment (, such as changes in interest rate policies ) and the push from institutional funds, will continue to expand the size of the derivation market, volatility may remain convergent, while risk indicators need to be continuously monitored, maintaining a cautiously optimistic attitude towards the continued rise in BTC prices.

I. 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 peaked at $110K in January, then fell to around $75K in April, a drop of about 30%. However, with the improvement in market sentiment and continued interest from institutional investors, the price of BTC climbed again in May, reaching a peak of $112K. As of June, the price stabilized around $107K. Meanwhile, BTC's market share continued to strengthen in the first half of 2025. According to data, BTC's market share reached 60% at the end of the first quarter, the highest level since 2021, and this trend continued in 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 for BTC spot ETFs, and the total assets under management for these ETFs have exceeded 130 billion dollars. Additionally, some global macroeconomic factors, such as the decline in the US dollar index and distrust in the traditional financial system, have also boosted the appeal of BTC as a means of value storage.

In the first half of 2025, the overall performance of ETH was disappointing. Although the price of ETH briefly touched around $3,700 at the beginning of the year, it soon experienced a sharp decline. By April, ETH had dropped below $1,400, a decrease of more than 60%. The price recovery 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 regain the early year's high. As of June 1, ETH's price 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, which dropped from 0.036 at the beginning of the year to a low of about 0.017, a decline of over 50%. This divergence reveals a significant drop 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 expected to improve.

The overall performance of the altcoin market is notably weak. Data shows that some mainstream altcoins represented by Solana briefly surged at the beginning of the year but then experienced a continuous pullback. SOL fell from a high of about $295 to a low of about $113 in April, a drop of over 60%. Most other altcoins ), such as Avalanche, Polkadot, and ADA (, also generally experienced similar or even larger declines, with some altcoins 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 product" to "institutional allocation asset/macroeconomic asset", while ETH and altcoins remain focused on "encryption native capital, retail speculation, DeFi activities", positioning them more similarly to tech stocks. The ETH and altcoin markets have shown continuous weakness due to decreased funding preferences, increased competitive pressure, and the impact of macro and regulatory environments. Aside from a few public chains like Solana), which 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, the ETH and altcoin markets are unlikely to significantly reverse their weak momentum without new strong ecological or technological drivers, and investors' sentiment towards altcoin investments remains cautiously conservative.

( BTC/ETH derivation positions and leverage trends

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

It is worth noting that the share of traditional regulated exchanges such as CME is rapidly increasing. As of June 1st, data shows that the open interest of CME BTC futures has reached 158,300 BTC), approximately 16.5 billion USD###, ranking first among all exchanges, surpassing a certain trading platform's 118,700 BTC(, approximately 12.3 billion USD) during the same period. This reflects that institutions are entering through regulated channels, with CME and ETFs becoming important increments. A certain trading platform still has the largest open interest contract scale among cryptocurrency exchanges, 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, breaking through 30 billion USD in May this year. As of June 1, data shows that a certain trading platform's ETH futures open interest reached 2.354 million ETH(, approximately 6 billion USD), ranking first among all exchanges.

Overall, the leverage usage by exchange users in the first half of the year has become more rational. Although the total open interest in the market has risen, multiple sharp fluctuations have eliminated 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 in the entire market occasionally reached peaks, they did not show a trend of sustained increase.

( 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 derivatives contracts, while mainstream spot indices do not effectively reflect the core pricing mechanism of the market. CGDI dynamically tracks the prices of the top 100 mainstream cryptocurrency perpetual contracts based on their open interest market capitalization ) Open Interest (, and combines it with the number of open contracts ) Open Interest ( for value weighting, creating a highly representative indicator of the derivatives market trend in real-time.

CGDI showed a divergent trend from BTC price in the first half of the year. At the beginning of the year, BTC surged strongly under the influence of institutional buying, maintaining prices near historical highs, but CGDI began to decline from February — the reason for this drop was the weak prices of other mainstream contract assets. Since CGDI is calculated based on the OI weighted by mainstream contract assets, while BTC was performing well, 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 towards BTC, with BTC maintaining its strength primarily supported by institutional long-term accumulation and the spot ETF effect, leading to an increase in BTC market share. Meanwhile, the cooling of speculative enthusiasm and capital outflow in the altcoin sector caused CGDI to decline while BTC price remained high. This divergence reflects a change in investor risk appetite: the positive factors of ETF and demand for safe-haven assets have led to an influx of funds into high market cap assets such as BTC, while regulatory uncertainty and profit-taking have put pressure on secondary assets and the altcoin market.

![CoinGlass encryption derivation semi-annual report: Market structure is clearly differentiated, and investment sentiment in altcoins is cautious])https://img-cdn.gateio.im/webp-social/moments-9c38247930ae7f30424853948a96d5e9.webp(

) CoinGlass Derivation Risk Index ( CDRI ) Analysis

CoinGlass Derivatives Risk Index ###, hereinafter referred to as "CDRI", is an indicator that measures the risk intensity of the encryption derivatives market, used to quantify the current level of leverage usage, trading sentiment heat, and systemic liquidation risk. CDRI focuses on proactive risk warning, issuing alerts in advance when market structure deteriorates, indicating a high-risk status even when prices are still rising. This index constructs a real-time risk profile of the cryptocurrency derivatives market through weighted analysis of multiple dimensions such as open contracts, funding rates, leverage multiples, long-short ratios, contract volatility, and liquidation volumes. CDRI is a standardized risk scoring model ranging from 0 to 100; the higher the value, the closer the market is to overheating or fragile status, making it prone to systemic liquidation scenarios.

The CoinGlass derivation risk index ( CDRI ) has generally remained at a neutral slightly high 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 obvious overheating or panic, and short-term risks are manageable.

2. Cryptocurrency Derivation Data Analysis

( perpetual contract funding rate analysis

The changes in the funding rate directly reflect the use of leverage in the market. A positive funding rate typically indicates an increase in long positions, suggesting bullish market sentiment; while a negative funding rate may indicate rising short pressure, leading to a more cautious market sentiment. The fluctuations in the funding rate remind investors to pay attention to leverage risks, especially during times of rapid changes in market sentiment.

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

As we enter the second quarter, market sentiment rationally returns, with funding rates mostly maintaining around 0.01% from April to June, annualized at about 11% below ), 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 funding rates turned from positive to negative is very limited, indicating that the moments of concentrated market bearish sentiment are not many. In early February, when news of Trump’s tariffs caused a sharp drop, the BTC perpetual funding rate briefly turned from positive to negative, indicating that bearish sentiment reached a local extreme; in mid-April, when BTC quickly dipped to around $75K, the funding rate turned negative again for a short time, showing that short positions crowded under panic sentiment; in mid-June, geopolitical shocks led to the funding rate falling into negative territory for the third time. Apart from these extreme situations, for most of the first half of the year, the funding rate remained positive, reflecting the market's long-term bullish tone. The first half of 2025 continued the trend of 2024: instances of funding rates turning negative are rare, each corresponding to sharp reversals in market sentiment. Therefore, the frequency of switching between positive and negative rates can serve as a signal for sentiment reversals------only this year in the first half.