03 Jan 2022
Leverage is back on the menuToday, BTC's perpetual open interest surpassed November highs, indicating that leverage is back on the menu.
Source: Glassnode, Skew
The “boring” market over the last month seems to have attracted traders back to leverage. The aggregated BTC denominated open interest in the BTC perpetuals has climbed back above the November highs, with the BTC denominated OI currently sitting at 258,000 BTC.Binance’s two perpetuals hold a combined OI of 107,000 BTC, of which 79,000 BTC worth of OI originates from the stablecoin margined perpetual. The leverage in this instrument has now doubled since December 5th.The OI has accumulated on neutral funding rates throughout December. This is in stark contrast to what we saw in October and November, where the OI growth was accompanied by substantially positive funding rates in a market with a clear bias for long exposure among leveraged traders.With the accumulated leverage recently, accompanied by the reduced volatility in the market and strong consolidation, the market seems ripe for a move. The neutral to slightly below neutral funding rates seen recently suggest that a short squeeze is a plausible scenario, but beware, longs may bleed if we see a push below the current tight consolidation range.