Analysis: Bitcoin has experienced the sharpest deleveraging since 2023, yet new liquidation risks remain.

CryptoQuant analyst Darkfost wrote in a post that Bitcoin has recently experienced the most severe deleveraging cycle since 2023. In a market long dominated by futures trading volume, Binance’s Open Interest (OI) has dropped significantly, once falling below its 180-day moving average, a sign of the intensity and speed of this deleveraging process. Darkfost argues this process is necessary for Bitcoin. As prices corrected, the market forced previously over-sized long and short positions to be closed or liquidated. This cycle also saw one of the largest liquidation events in Bitcoin’s history. However, despite the sharp deleveraging, Binance’s current Open Interest stands at around $9.6 billion, higher than the 180-day average of roughly $8.3 billion, accounting for about 37% of Bitcoin’s total network-wide Open Interest. This level is even higher than during the May market rally, when BTC briefly rebounded to $82,000. Darkfost points out that while this adjustment has dealt a clear blow to traders, leveraged funds have seemingly quickly returned to the market, becoming one of the key drivers of BTC’s recent rebound. That said, current market leverage levels remain elevated, and if leverage accumulates excessively again in the future, it could still trigger another round of sharp deleveraging.