The amount of open interest in the Bitcoin and Ethereum futures markets decreased significantly after the sharp sales seen in late May and early June. In four days, Bitcoin’s open interest fell 25 percent to $23.2 billion. In Ethereum, the level of 9.8 billion dollars was seen, with a 13 percent decline.
Strong sales in the market erased open positions
According to the data, the open position amount in Bitcoin decreased to the lowest level seen since the beginning of April, while levels not recorded since March were tested in Ethereum. Open position refers to the total position size that has not yet been closed in futures contracts. This indicator is closely monitored to monitor the concentration of leverage and the level of speculative interest in the market.
Mini dictionary: Open position shows the total size of contracts currently open in the futures markets. When this number rises, it means that the leveraged transaction intensity in the market increases, and when it falls, the positions are closed or liquidated.
During the selloff, investors who held leveraged long positions were liquidated in response to the rapid price decline. During this period, exchanges automatically closed positions to limit losses. The resulting additional selling pressure also caused the decline to deepen in a short time.
The sharp pullback in late May and early June triggered widespread liquidations in leveraged futures markets, according to Santiment Intelligence data; This situation caused many investors to be pushed out of positions.
Liquidations reduced leverage
The chart reported by Santiment Intelligence showed that two major crypto assets experienced similar pressure in the same time period. This outlook indicated that a coordinated stress was occurring across the market. In particular, transactions carried out with excessive leverage accelerated chain closings because they did not leave enough room for price movement.
According to experts, a high open interest level is often considered a sign of fragility in crypto markets. Because this structure, which consists largely of leveraged transactions, can cause sharp dissolutions if the price turns in the opposite direction. With the latest decline, a significant part of this density has been cleared from the system.
Multi-month lows could limit new pressure
The return of open positions in Bitcoin and Ethereum to multi-month low levels stands out as a development that may reduce the risk of a new chain sale in the short term. Less open leveraged positions may mean fewer forced closes on possible new declines. This may contribute to the market settling on a calmer ground in the short term.
In past market cycles, a more balanced trading environment was observed following large liquidation waves. The decrease in position density is observed as one of the factors that support the recovery process of the market after sharp corrections. Therefore, the latest data reveal that in addition to the loss in prices, the accumulation of risk in derivative markets has also decreased significantly.
