Crypto-Native Traders, Not TradFi, Drove Bitcoin’s Largest Deleveraging Event

Friday was the largest liquidation event on a nominal basis in crypto history. The scale of deleveraging is best understood by looking at open interest (OI) — the total value of outstanding futures and perpetual contracts that have not yet been settled.

Glassnode's data shows before Friday’s sell-off, bitcoin open interest stood at around $70 billion, an all-time high. This equated to roughly 560,000 BTC worth of futures positions. Following the deleveraging, OI fell to about $58 billion, or approximately 481,000 BTC.

Because USD-denominated OI is influenced by bitcoin’s price which dropped from $122,000 to $107,000 during the event looking at OI in BTC terms provides a more accurate picture of the scale of the deleveraging.

Data from Glassnode shows that Friday marked the largest single-day deleveraging event for bitcoin in USD terms, with more than $10 billion wiped from OI in a single day. In BTC terms, it was the second-largest deleveraging event on record, trailing only the COVID crash in March 2020. However, it’s important to note that bitcoin was trading near $5,000 back then, compared to $122,000 which significantly impacts the comparison in nominal terms.

Breaking the data down by exchange shows where the deleveraging came from. The Chicago Mercantile Exchange (CME) the largest venue for bitcoin futures typically used by institutional investors saw little change, with OI holding steady at around 145,000 BTC.

In contrast, Binance, the second-largest futures exchange, experienced a significant reduction, with OI plunging from $16 billion (130,000 BTC) to $12 billion (105,000 BTC). This suggests that the deleveraging was concentrated primarily within the crypto-native trading ecosystem, rather than being driven by traditional finance participants.

Historically, large single-day or short-term drops in open interest of this magnitude have often coincided with market bottoms. Previous examples include the March 2020 COVID crash, the summer 2021 sell-off during China’s mining ban, and the collapse of FTX in November 2022.