📉 The sharp crypto selloff at the end of May and beginning of June triggered a wave of liquidations across leveraged futures markets, forcing many traders out of their positions as prices rapidly declined. When leveraged longs are liquidated, exchanges automatically close positions to cover losses, creating additional selling pressure that can accelerate market declines.

📊 The result was a substantial reduction in speculative activity across both Bitcoin and Ethereum derivatives markets. Over just four days, Bitcoin’s total open interest fell roughly 25% to $23.2B, its lowest level since early April, while Ethereum’s open interest dropped 13% to $9.8B, reaching levels not seen since March. These declines indicate that a large amount of leveraged capital was flushed from the market during the downturn.

😮 While liquidations are painful for traders caught on the wrong side of the move, they often help reset market conditions. Elevated open interest can signal excessive speculation and overcrowded positioning, making markets more vulnerable to sharp corrections. By removing a significant portion of that leverage, the recent liquidation event has brought Bitcoin and Ethereum open interest back toward multi-month lows. Historically, periods of declining open interest following major liquidations have often reduced the risk of further cascading selloffs because fewer leveraged positions remain to be forcibly closed. 👍

🔗 Track Bitcoin’s & Ethereum’s open interest on this chart link here!