Original Coverage & Source Attribution: en.bloomingbit.io
- Bitcoin futures leverage and open interest rose to levels similar to those seen just before last October’s “great liquidation,” but analysts said the market is less overheated now, limiting the risk of cascading liquidations.
- The report said perpetual futures funding rates, a decline in derivatives-linked stablecoin supply, and liquidation intensity — the amount liquidated for every 1% drop — are all well below the levels seen in October last year.
- It said the U.S. FOMC, Bitcoin’s $82,300 support level, and spot ETF inflows will be the key factors in determining whether Bitcoin falls further or retakes the $86,000 level.
Forecast Trend Report by Period
Rising leverage in the Bitcoin futures market is fueling concern that last year’s “October great liquidation” could be repeated. Still, some analysts say the market is less overheated than it was then, suggesting the risk of a large cascade of liquidations remains limited.
CoinGlass data on October 7 showed Bitcoin futures open interest climbed 4.0% over the past seven days to 650,480 BTC. That is similar to the move ahead of last year’s mass liquidation on October 10, when open interest rose 4.1% over the preceding five days.
Forced liquidations mounted as the crypto market tumbled the same day. Bitcoin fell more than 2% to the $83,000 level, while Ether dropped 3.5% to around $2,600. Long positions took the brunt of the hit, with about $403.58 million liquidated in just one hour.
Traders are watching the resemblance between the recent buildup in leverage and the period just before last October’s rout. At the time, U.S. President Donald Trump announced additional tariffs on Chinese imports, triggering a sharp market selloff. CoinGlass data showed that more than $19 billion in crypto positions was forcibly liquidated over October 10-11 last year. About 90% of that total was in long positions, or roughly $17 billion.
Leverage relative to market size has also moved closer to those levels. Bitcoin open interest now stands at 3.2% of market capitalization, approaching the 3.7% seen just before October 10 last year. Ether is at 10.4%, compared with 11.3% at the time.
Leverage Has Risen, but Overheating Looks Limited; Liquidation Intensity Is One-Ninth of Last Year
Even so, current market leverage differs from conditions in October last year, analysts say. Ananda Banerjee, an on-chain analyst at BeInCrypto, said leverage is expanding again, but there are no clear signs yet of the kind of overheating seen then. The main reason, he said, is that the cost of maintaining positions has fallen sharply from a year earlier.
A key gauge of overheating is the funding rate in the perpetual futures market. Funding is the fee exchanged between long and short traders. Persistently high positive funding rates are typically interpreted as a sign that bullish long bets have become overcrowded.
Just before last October’s liquidation event, Bitcoin and Ether funding rates on Binance and Bybit topped an annualized 8% on 18 of 32 exchange-day observations. Recently, only one of 28 observations exceeded 8%, while three were negative. Deribit showed a similar pattern. Bitcoin funding on the exchange has fallen to 7.1% recently from an annualized 26.9% ahead of last year’s liquidation wave. In other words, leverage has grown, but the cost of betting on further gains is lower than it was then.
Another difference is the decline in derivatives-linked stablecoin supply. CoinGecko data showed Ethena’s USDe supply has fallen 66% since October last year to $4.99 billion. That means less capital is available for leveraged trading.
Liquidation intensity during price declines has also been lower. Over the past 24 hours, about $487.02 million in long positions was liquidated as Bitcoin fell roughly 2%. That works out to about $248 million in liquidations for every 1% drop in Bitcoin’s price. During last October’s liquidation event, the figure was about $2.2 billion for every 1% decline, putting the current level at roughly one-ninth of that.
Focus Turns to Bitcoin’s $82,300 Support; ETF Inflows Also Key
The next major variable for the market is the U.S. Federal Open Market Committee meeting scheduled for October 27-28. Banerjee said another rate increase after September would push Treasury yields higher and could send Bitcoin down to $82,300. He added that the odds of a large chain reaction of liquidations like last October remain low as long as funding rates stay below an annualized 8%.
A recovery in institutional buying through U.S. spot exchange-traded funds is also critical to any rebound. Omkar Godbole, an analyst at CoinDesk, said ETF inflows were the main driver behind Bitcoin’s rally in September. For Bitcoin to reclaim the $86,000 level and extend gains, institutional demand needs to return.
SoSoValue data showed U.S. spot Bitcoin ETFs posted net inflows of $2.65 billion in September. Last week, however, net inflows totaled only $241 million. This week, flows turned negative again, with net outflows reaching $487.07 million as of October 7.
Oliver Kading, head of marketing at Tesseract Group, said current ETF buying has yet to recover enough to offset macroeconomic pressure. Daily inflows of about $300 million or more across multiple trading sessions would be an important signal that institutional demand is returning.
