Bitcoin and Ether Rally Strengthens as Open Interest in Perpetual Futures Surges 

The cryptocurrency market saw a significant uptick in momentum on Tuesday as Bitcoin (BTC) and Ether (ETH) staged an impressive recovery rally. The perpetual futures market reflected this optimism with a notable increase in open interest, indicating growing investor confidence. This came as the Trump administration softened its stance on trade-tariffs and anti-Federal Reserve rhetoric.

BTC, the leading cryptocurrency by market cap, surged by 6.79%, nearly breaching the $94,000 mark for the first time since March, according to CoinDesk. This represents the most substantial single-day percentage gain since April 9. Meanwhile, Ether, the native token of the Ethereum blockchain, climbed 11% to $1,1175, marking its best performance since April 2.

The rally gained traction following U.S. Treasury Secretary Scott Bessent's remarks about easing U.S.-China trade tensions, complemented by President Trump’s announcement of a significant reduction in tariffs on Chinese goods from 245%. Trump also stated that there were no plans to dismiss Federal Reserve Chair Jerome Powell.

Traders appeared to channel funds into perpetual futures trading on major offshore platforms, as evidenced by spikes in open interest at Binance, Bybit, OKX, Deribit, and the decentralized exchange Hyperliquid.

According to Velo, cumulative notional open interest—the dollar value of active BTC perpetual futures contracts—increased by 10% to $17.83 billion, marking the biggest single-day rise since March 2. Notably, this coincided with Trump's mention of XRP, ADA, and SOL as potential inclusions in a strategic digital assets reserve alongside Bitcoin and Ether, which remain the core. The administration later disclosed plans to hold confiscated Bitcoin as part of its reserve strategy.

"Bitcoin's open interest is rising at a faster pace than its price, with Binance accounting for the majority of activity," noted Joao Wedson, CEO of Alphractal Research, via X. "However, the dominance of long positions suggests increased volatility may be imminent."

This surge was likely propelled by a short squeeze, wherein traders unwound bearish perpetual futures positions. Negative funding rates 24 hours prior had signaled a bearish bias, which shifted as prices climbed.

In the Ethereum market, notional open interest soared nearly 16% to $6.60 billion—the largest single-day jump since November 27. Analysts suggest that rising open interest in tandem with price gains confirms bullish momentum, implying that BTC and ETH may sustain their upward trajectories.

Funding Rates Turn Bullish 

The move toward bullish sentiment is evident in the positive annualized funding rates for BTC and ETH perpetual contracts, ranging from 5% to 10%. Funding rates, paid every eight hours, balance discrepancies between contract and spot prices. A positive rate reflects traders’ willingness to pay premiums to maintain long positions, signaling optimism in the market. However, the current levels are moderate, avoiding concerns of over-speculation.

The cryptocurrency markets are keeping an eye on these developments as investors assess whether this rally will continue in the coming days.