BaykusCharts
Bitcoin's Leverage Flush Hasn't Arrived Yet
Bitcoin has gone through three major corrections this year. The first two ended with a sharp leverage flush in the derivatives market. The third hasn't seen one yet. In February, as BTC fell from $87K to $67K, Binance BTC-USDT Open Interest dropped from $9B to $5.5B. Roughly one-fifth of positions in coin terms were wiped out within days, and the bottom formed right inside that liquidation wave. In June, price fell from $78K to $62K while Open Interest barely moved. The real reset came at the end of the month in a single day: Open Interest collapsed from $8B to $6.1B, around 20% in coin terms, and the yearly low near $59K was printed right after. The bottom came with the leverage reset, not the price drop. Since mid-October, BTC has declined from $85K to $74.3K and Open Interest from $9.4B to $7.2B. However, only about 12% of positions have closed in coin terms, with no single capitulation day. Funding Rates support this view. In both previous flushes, they collapsed alongside Open Interest. Today they remain positive, suggesting many new positions are leveraged longs buying the dip. Meanwhile, the Binance Exchange Whale Ratio and Fund Flow Ratio reached near yearly highs in early November, as whales send more BTC to the exchange. Leverage is still in the system, and a sharp downside move could trigger cascading liquidations. Negative Funding Rates and a sharp single-day drop in Open Interest would be the clearest signs that the flush has arrived.