Analysis: The process of deleveraging has accelerated, and Binance's Bitcoin open interest has decreased by 17% in one month

CryptoQuant analyst Darkfost stated that within less than a month, the open interest of BTC on the Binance platform has decreased from 10.6 billion dollars to 8.8 billion dollars, a drop of 17%. Meanwhile, its 180-day moving average has risen from 8.4 billion dollars to 8.6 billion dollars. As the open interest falls below the moving average, new signals of deleveraging are emerging in the market. In a bull market phase, this signal typically appears when market corrections are nearing their end, reflecting that traders are reducing their leveraged exposure, which includes both voluntary liquidations and forced liquidations due to insufficient margin.

Aside from the fact that this process may last for months in a bear market, a similar signal last appeared in June of this year when the BTC price was below 60,000 dollars, subsequently rebounding to above 87,000 dollars, with an increase of over 45%. Currently, as the open interest declines, the market is also experiencing large-scale liquidations. Low volatility seems to encourage some traders to take on higher risks to compensate for the insufficient returns brought about by the narrowing price fluctuations, making them more susceptible to market reversal shocks. Over the past three months, the monthly liquidation scale on Binance has reached new highs since 2021: over 1.4 billion dollars in August, 1.1 billion dollars in September, and 1.3 billion dollars in October. This trend appears to continue into November, with the liquidation scale exceeding 520 million dollars before the end of the first half of this month.

These data highlight the potential losses that leveraged trading can bring to investors. In a market environment with low volatility and shrinking trading volume, blindly increasing risk exposure due to a lack of patience can quickly lead to heavy costs. However, the deleveraging phase also helps improve the market environment. Reducing leveraged positions can lower the risk of cascading liquidations, allowing spot demand to play a greater role in market pricing, thereby helping Bitcoin establish a more robust market structure.