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# Derivatives Structure Gives Bulls a Tactical Advantage
- URL: https://axeladlerjr.com/derivatives-structure-gives-bulls-a-tactical-advantage/
- Published: 2025-12-22T07:48:38.000Z
- Updated: 2026-11-04T12:39:15.000Z
- Description: Bitcoin derivatives structure explained: funding rates, open interest, and liquidation levels. How to read futures data to identify bullish or bearish setups.
- Author: Axel Adler Jr.
- Tags: Derivatives & sentiment, Adler AM: Bitcoin Morning Brief, #Import 2026-11-01 20:37

The BTC market is in the upper part of the Regime Score neutral zone, which has historically shown positive expected returns. The current liquidation structure in the futures market indicates a predominance of short position closures, creating additional mechanical pressure in favor of buyers.

## TL;DR  

Market analysis suggests tactical upside potential for BTC through the lens of regime indicator and liquidation structure. Logic: the score's transition into the +15–30 zone has historically delivered positive returns, while current short liquidation dominance amplifies the asymmetry in favor of bulls.

### **Bitcoin Regime Score**

![Chart of Bitcoin's composite market regime indicator showing alternation between bullish and bearish phases throughout 2025.](https://axeladlerjr.com/content/images/2025/12/Bitcoin-Regime-Score.png)

Chart of Bitcoin's composite market regime indicator showing alternation between bullish and bearish phases throughout 2025.

The composite indicator combines taker imbalance, OI pressure, funding, [ETF flows](https://axeladlerjr.com/charts/bitcoin-etf-flow-monitor/), exchange flows, and price trend into a single scale from −100 to +100.

Regime Score stands at +16.3, corresponding to the upper part of the neutral zone (+15 to +30). Backtesting for 2025 shows this subzone historically delivered average returns of +3.8% over 30 days, unlike the −15 to 0 subzone where expected returns were negative (−1.5% over 7d). Visually, the indicator has emerged from a recent bearish phase (score dropped to −27 a week ago) and is showing recovery.

The indicator's current position is constructive. An important nuance from backtesting: transition into the formal Bull regime (+30 and above) historically coincided with local tops and delivered negative average returns of −3.3% over 7 days. This means the current +15–30 zone may be optimal for tactical positions, while aggressive accumulation upon breaking +30 carries elevated risk.

### **Bitcoin Futures Long Short Liquidations Dominance**

![Chart of the long/short liquidation dominance oscillator for Bitcoin futures market from 2023 through December 2025.](https://axeladlerjr.com/content/images/2025/12/Bitcoin-Futures-Long-Short-Liquidations-Dominance.png)

Chart of the long/short liquidation dominance oscillator for Bitcoin futures market from 2023 through December 2025.

The oscillator shows the difference between long and short position liquidation volumes: negative values indicate predominance of short closures.

The oscillator's current value has dropped into negative territory (−11%), while the 30-day moving average (shown on the chart) remains positive (+10%). This divergence points to a recent surge in forced short position closures. Long Liquidation Dominance stands at 44%, below the 50% baseline, confirming the predominance of short liquidations.

The predominance of short liquidations creates tactical fuel for upside. This chart reinforces the positive signal from Regime Score: the market has not only entered a zone with historically positive expected returns but is also receiving additional support from derivatives structure.

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### **FAQ**  

**Why is the +15–30 zone better than the formal Bull (+30)?**   
Backtesting for 2025 showed this result: the Bull regime (score above +30) delivered average returns of −3.3% over 7 days, as signals arrived at local tops before corrections. The +15–30 zone, conversely, demonstrated positive expected returns of +0.7% over 7d and +3.8% over 30d. This suggests the current level may be optimal for tactical positions.

**What would need to happen for the picture to deteriorate?**   
A return of Regime Score below zero accompanied by a reversal of the liquidation oscillator into positive territory (rising long liquidations) would signal exhaustion of the current impulse. Historically, the −15 to 0 subzone delivered negative expected returns of −1.5% over 7 days.

### **CONCLUSIONS**  

The BTC market is in a "bullish neutrality" zone with Regime Score at +16.3\. Backtesting for 2025 shows this subzone (+15 to +30) historically delivered positive returns of approximately +0.7% per week and +3.8% per month. Derivatives structure reinforces the constructive signal: the liquidation oscillator in negative territory indicates predominance of short closures, creating buyer pressure. Important nuance: transition of the score into the formal Bull regime (+30) historically coincided with local tops, so aggressive position building upon breaking this level carries elevated risk.

## Live Charts

Explore the metrics behind this brief with live, auto-updating charts:

[Derivatives](https://axeladlerjr.com/charts/derivatives/) \- All funding, open-interest, and leverage charts in one view.  
[BTC US ETF Flow Monitor](https://axeladlerjr.com/charts/bitcoin-etf-flow-monitor/) \- US spot Bitcoin ETF daily flow, BTC-denominated accumulation, and fund leadership.