24 Jan 2022

Leverage remains high with 360,000 BTC worth of OI in the market

The open interest has taken a significant hit when measured in USD, but when measured in BTC, the leverage in the market still seems lofty.
Source: CoinMetrics
The BTC denominated open interest maintains its size of 360,000 BTC, with perps still seeing an open interest above 240,000 BTC.In other words, the market is still exposed for further significant shakeouts.Back in May, we saw that the open interest fell rapidly down towards 300,000 BTC as liquidations cleared the market. The OI then remained low until late July. In December, we saw a far more rapid recovery of the open interest which is slightly concerning.A short squeeze lifted the market out of its sorrowing state in July. High leveraged shorts led the tide to change. A short squeeze could still be in play in BTC. Low funding rates and the declining basis lately suggest that shorts have been more aggressive than longs, and the constant downtrend in BTC might lead to further conviction from leveraged short traders.However, the muted liquidations experienced amid the turmoil compared to what we’ve seen earlier might also suggest that underwater longs are exposed for further decline.
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