Bitcoin traded at approximately $25,900 at the beginning of September, marking a significant shift from its summer performance. Throughout the past three months, Bitcoin maintained a historically unparalleled tight trading range. However, a notable dip below $29,000 in mid-August eradicated billions in leverage from the market, signaling a long-awaited market shift.
As Bitcoin matures, its derivatives market is evolving in tandem. Products such as futures, options, and perpetual futures have grown exponentially, wielding the power to influence Bitcoin’s price more than the traditional spot market.
This trend underscores the importance of monitoring the derivatives market. Specifically, gauging the amount of leverage in this market can provide insights into the inherent risks associated with potential long/short squeezes and ensuing liquidation cascades.
Graph showing the open interest on Bitcoin futures and perpetual futures YTD (Source: Glassnode)
A key metric that offers a window i
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