The cryptocurrency market experienced a surge in long liquidations over the past hour, as the price of bitcoin dropped by over 3% to hover above the $65,000 mark.
Despite the spike in long liquidations, André Dragosch, head of research for Europe at Bitwise, observed that the recent surge in bitcoin futures open interest seems more robust than previous periods of elevated leverage. He referenced a similar situation earlier this year, where an increase in leveraged bets preceded a liquidation event that resulted in a 22% drop in bitcoin’s price.
"One reason for this is that traditional exchanges like the CME now dominate the open interest landscape, attracting institutional and sophisticated investors who often engage in market-neutral strategies like basis trading," Dragosch said.
He further noted a shift towards cash-margined futures contracts, which have now reached a record high. Crypto-margined contracts now comprise only around 20% of all contracts, down from about 80% in 2021.
"This transition enhances the stability of the Bitcoin futures market, as cash collateral is less volatile and less susceptible to margin calls compared to crypto-margined contracts," said Dragosch.
The analyst also speculated that the largest digital asset by market capitalization could find support from an increase in the bitcoin apparent demand metric.
"Bitcoin apparent demand is increasing, and this recent uptick coincides with other metrics signaling a significant surge in demand and buying power," Dragosch said.
Bitcoin apparent demand has increased at its fastest monthly pace since April 2024. Image: CryptoQuant.
He highlighted key developments contributing to this trend, noting that on Monday, U.S. spot bitcoin exchange-traded funds (ETFs) recorded their highest daily net inflow since July 2024. Additionally, net buying volumes on bitcoin spot exchanges reached their highest level since August 2024. He also noted that the bitcoin realized cap — which considers the price each bitcoin last moved — increased to its highest point since May 2024, indicating a substantial rise in on-chain capital investment.
This increase in demand was echoed by CryptoQuant Head of Research Julio Moreno, who told The Block that "bitcoin apparent demand is growing at its fastest monthly pace since April 2024." Moreno said that sustained demand could potentially lead to higher prices and ignite a prolonged price rally in the fourth quarter of this year.
The bitcoin apparent demand metric is calculated by measuring the change in mined supply minus the change in inactive supply over a specified period, typically one year. This approach estimates the change in demand relative to inventory changes, providing insight into market dynamics.
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