According to CoinDesk, BTC-margined contracts now account for 33% of the total futures open interest, up from 20% in July, as reported by Glassnode. These contracts offer a non-linear payoff, bringing traders to their position-liquidation point faster than cash-margined contracts.

Bitcoin's use as a margin in futures trading has increased since July, with the percentage of bitcoin futures open interest margined with bitcoin rising to 33% from roughly 20%. Cash or stablecoin-margined contracts still account for 65% of the total open interest.

The renewed interest in BTC-margined contracts means potential for volatility-boosting liquidations cascades, according to research provider Blockware Intelligence. Coin-margined contracts are quoted in U.S. dollars, but margined and settled in cryptocurrencies, creating a non-linear payoff where a trader earns less when the market rallies and loses more when the market drops.

Frequent volatility-boosting liquidations cascades may occur if coin-margined contracts become dominant. Such events were common before September 2021, when coin-margined contracts accounted for more than 50% of the global open interest. Blockware suggests the renewed interest in these contracts represents a shortage of cash in the market.

Liquidity has been leaving the crypto market for some time. The total market value of all stablecoins contracted by 0.4% to $125 billion in August, marking the 17th consecutive monthly decline. The market cap of tether (USDT), the world's largest stablecoin by market value, has fallen almost $1 billion to $82.87 billion in the past four weeks, according to CoinGecko data.