Bitcoin has shown resilience recently, rebounding from a low near $114,800 and stabilizing its price around $119,580, which poses this level as a potential support. However, a concerning increase in leverage within the derivatives markets suggests a precarious situation may be unfolding. According to data from Bitfinex Alpha, between July 23 and 24, the cryptocurrency market faced significant liquidations, with over $1.1 billion in leveraged long positions across major exchanges being wiped out, and daily average liquidations reaching $350 million in the past month. Notably, a sharp 5% decline in Bitcoin over just three days during this period triggered $1.46 billion in liquidations.
The dynamics within market interest are shifting as well. Bitcoin’s open interest (OI) dominance has dropped to 41%, compared to 51% three months prior, while Ethereum’s share has surged to 26%, fueled by rising ETF speculation and increased institutional participation. Interest in altcoins has also grown, culminating in an increase in their combined open interest from $26 billion to $44 billion since early July, driven by capital rotation towards higher-risk assets like Solana, XRP, and Dogecoin.
The report highlights that the fragility of the market appears to be increasing, as liquidations of altcoins relative to Bitcoin have reached unprecedented levels, indicating crowded positions that could amplify volatility. Traders are advised to keep a close watch on the $114,800 support level and to practice caution in this leveraged landscape. Effective risk management, including careful position sizing and monitoring funding rates, is essential because market reactions may outpace traditional chart indicators.
Should the current leverage levels diminish, Bitcoin’s rebound could gain momentum; however, a continued incline in leverage raises the risk of significant testing of support levels should the market experience any further shocks. This cautious approach may promote a healthier trading environment in the long run.