FLASH: Bitcoin healthy cool off over weekend resets margin leverage but does not signal end of bull market as “Dogecoin” retail traders are now entering the market

Bitcoin made new ATHs last Wednesday as investors piled in ahead of the Coinbase IPO. As we mentioned in our note last Friday (click this link), we thought a “crypto cooling off would be heathy” – and that’s what we got over the weekend.

The video in this report is only accessible to members

Source: FSInsight, Glassnode

Futures open interest saw a significant drop alongside price

Bitcoin futures open interest, which had been rising with the price, saw an even steeper correction over the weekend starting Saturday night as the market sold off.

The video in this report is only accessible to members

Source: FSInsight, Coinalyz

Highest level of futures liquidations in at least 8 months

The decline in Bitcoin futures open interest was heavily influenced by the highest level of trader liquidations we’ve seen in at least the last 8 months.

The video in this report is only accessible to members

Source: FSInsight, Coinalyz

Rising margin leverage resetting with the recent pull back

The absolute level of futures open interest, which can rise with the price, is not as important as the amount of margin leverage behind those positions. Many offshore crypto exchanges offer uses up to 100x leverage on futures positions. One metric for estimating margin leverage is to look at the total open interest relative to the BTC and stablecoin collateral held on those exchanges using on-chain data.

Traders were takin...

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