Bitcoin futures 'falling leverage' wipe out $10 billion in open interest in 2 weeks

New research indicates that Bitcoin exchanges are undergoing a significant "leverage reduction event," which will shape future growth.

In a report on March 17, the on-chain analysis platform CryptoQuant revealed that the Bitcoin futures market experienced a large-scale liquidation of up to 10 billion USD.

Bitcoin undergoes an "essential" phase for sustainable growth

Since the BTC/USD pair reached its historic peak in mid-January, Bitcoin derivatives traders have adopted a more cautious stance.

Data from major cryptocurrency exchanges shows that the total open interest (Open Interest – OI) of Bitcoin futures contracts has decreased by 10 billion USD in just three weeks, from February 20 to March 4.

"On January 17, the open interest of Bitcoin reached an all-time high of over $33 billion, reflecting unprecedented levels of leverage in the market," said expert Darkfost from CryptoQuant.

He believes that this decline is "an essential phase to maintain sustainable growth" and is part of the "natural reset of the market."

Data on Bitcoin futures open interest for leading exchanges | Source: CryptoQuantThe accompanying illustrative chart shows the alternating change in total open interest over 90 days, highlighting the sharp downward trend after Bitcoin reached its peak.

"Currently, the open interest rate of Bitcoin futures contracts has sharply decreased to -14% over the past 90 days," Darkfost said.

"Based on historical trends, each deleveraging like this presents attractive investment opportunities in the short to medium term," he emphasized.

The spot market faces a "demand crisis"

CryptoQuant expert Kriptolik also pointed out that the derivatives market has become increasingly active since November 2024.

Notably, the reserves of stablecoins on derivative exchanges are rapidly increasing, even surpassing the spot market. However, this is not necessarily a positive signal for the price of Bitcoin.

"When analyzing the volume and circulation of stablecoins – the main liquidity provision factor for the market – we found that although the total supply of stablecoins has surged since November 2024, this has yet to yield significant benefits for the market or investors," the analysis article stated.

According to Kriptolik, the spot market is experiencing a "demand crisis" as new capital inflows are insufficient to drive prices up.

"Until the allocation between the spot and derivatives markets returns to a balanced state, avoiding high-leverage trades ( and significant risks ) may be the most prudent strategy," he advised.

Stablecoin reserves on exchanges | Source: CryptoQuantDisclaimer: This article is for informational purposes only and is not investment advice. Investors should conduct thorough research before making decisions. We are not responsible for your investment decisions

• There will be no Bitcoin price increase in 2025 – the 'good times' will begin in 2026
• Bitcoin price cannot increase parabolically when the US Dollar Index (DXY) decreases.

Mr. Giáo

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