Binance's bitcoin open interest fell 17 percent in less than a month. An analysis said market structure could improve as excessive leverage is unwound.
CoinPost, a blockchain outlet, cited on-chain analytics firm CryptoQuant as saying its analyst Darkfost said Binance's bitcoin open interest fell to $8.8 billion from $10.6 billion. He interpreted it as a new signal that leverage is being reduced.
Darkfost said such leverage reductions in a bull market often appear near the end of a correction. He noted that when a similar signal appeared in June, bitcoin was below $60,000 but later rebounded more than 45 percent, rising above $87,000.
The recent drop in open interest came alongside large-scale liquidations. Binance's monthly liquidations topped $1.4 billion in August, $1.1 billion in September and $1.3 billion in October, marking the highest levels since 2021 for three straight months. In November, it had already exceeded $520 million before the middle of the month.
Darkfost said the preceding low-volatility market increased liquidation risk. As price moves were limited, traders increased leverage to boost returns, creating a structure in which losses expand sharply when the market turns, he said.
Leverage liquidations can increase investor losses and price volatility in the short term, but the risk of cascading liquidations may fall after excessive positions are cleared. Darkfost said spot demand plays a bigger role in supporting prices in this process, and bitcoin's market structure could also become more solid.
The key question is whether spot buying can fill the gap left by reduced leverage. It cannot be concluded that June's rebound will be repeated this time. Whether the drop in open interest leads to shrinking participation or becomes a process of easing overheating and laying the groundwork for recovery will depend on supply and demand going forward.
