In a surprising development for the crypto sphere, the U.S. dollar value secured in active ether perpetual futures contracts on Binance has plunged to its lowest point in over a year. As stipulated by Coinglass data, the notional open interest now stands at $1.41 billion, a figure unseen since July of 2022.
Particularly noteworthy is that Binance, recognized globally as the largest digital asset exchange in terms of trading volume and open interest, has had its ether futures notional value dip by 35% within a week. This sudden decrease mirrors the system-wide leverage washout experienced last Thursday.
During the same time frame, the exchange’s bitcoin perpetual futures commanded a decreased notional open interest of 17%, leaving the current standing at $3.02 billion. Dissecting these findings, Reflexivity Research suggest a silver lining – any surplus leverage in the derivatives market has now effectively been eradicated from the system.
Speaking to ether’s global estimated leverage ratio, which is delineated by the dollar value in active open perpetual futures contracts divided by the aggregate coins held by derivatives exchanges, we’ve seen a drop from a multi-month peak of 0.28 to 0.22. Data from South Korea-based firm CryptoQuant echoes this, with Bitcoin’s ratio also seeing a decline from 0.27 to a six-month low of 0.21.
The implications here are that the extent of leverage utilized to amplify returns is strikingly lower compared to a week ago. Looking towards the future, this denotes a diminished probability of forthcoming volatility instigated by liquidations.
Lan Solot, co-head of digital assets at Marex Solutions, urges restraint in interpretation, stating, “Don’t read much into the recent move; it was exceptionally low liquidity + leverage liquidation. Technicians will draw lines and commentators will peddle their preconceived views. But it was a typical positioning reset, especially for BTC. Moving on.” Thus, implying that market circumstances may merely be a standard repositioning, particularly for BTC.
However, in the sea of cryptocurrency, it seems that big waves are always on the horizon, so this quiet interlude may well be interpreted as the quiet before the storm. Only time – and diligent monitoring – will reveal the true nature of these recent market shifts.