Open interest in Bitcoin and Ethereum futures markets saw a sharp decline following heavy selloffs at the end of May and start of June. Within just four days, open interest in BTC plunged by 25 percent to $23.2 billion, while ETH dropped 13 percent to $9.8 billion.
Major selloff wipes out leveraged positions
Data indicates that BTC’s open interest fell to its lowest level since early April, while ETH returned to values not seen since March. “Open interest” refers to the total size of unsettled futures contracts and serves as a closely watched gauge of leverage and speculative appetite in the market.
Mini glossary: Open interest reflects the cumulative value of all currently active, unclosed contracts in futures markets. A rise means a surge in leveraged trades, while a decline signals closing or liquidation of positions.
The rapid price drop triggered automatic liquidations for investors holding high-leverage long positions. To limit losses, exchanges closed these positions automatically, adding extra selling pressure and deepening the decline in a short time.
According to Santiment Intelligence, the sharp downturn at the end of May and start of June triggered widespread liquidations in leveraged futures markets, pushing large numbers of investors out of their positions.
Liquidations reduce risk from excessive leverage
Data shared by Santiment Intelligence showed that both major crypto assets experienced similar pressures during the same period, pointing to a coordinated wave of stress across the market. Highly leveraged trades, lacking enough cushion against price swings, fueled cascading liquidations.
Experts often view high open interest as a sign of vulnerability in crypto markets. When the majority of these positions are leveraged, a sudden price reversal can trigger massive, rapid unwinding. The latest drop has flushed a significant portion of this risk from the system.
Multi-month lows may curb future volatility
With open interest in BTC and ETH now at multi-month lows, analysts say the threat of another wave of forced selling has receded for now. Fewer leveraged positions mean that any further price drops are less likely to trigger a new round of automatic liquidations, helping to stabilize the market in the near term.
Previous market cycles have shown that, after large waves of liquidations, trading activity tends to settle down. Lower position density supports the market’s recovery after sharp corrections. In this light, the latest numbers reveal not just losses in prices, but also a significant drop in accumulated risk within derivatives markets.
