Key Takeaways
- Significant increase in daily crypto liquidations.
- Impact of high-leverage futures contracts on the market.
- Role of spot ETFs in shifting market dynamics.
- Shift in capital flows towards Bitcoin and its increasing market share.
- Bitcoin competing with Visa as a settlement rail.
Daily Crypto Liquidations Nearly Tripled This Cycle
The cryptocurrency market is witnessing a notable surge in daily liquidations, having nearly tripled this cycle. This increase is attributed to rising open interest and broader exchange activity, fueling a market heavily reliant on leverage.
According to a new report from Glassnode and Fasanara, average daily futures wipeouts have risen from approximately $28 million in long positions and $15 million in shorts in the last cycle to about $68 million long and $45 million short this time around. This was particularly evident on October 10, during the reset researchers dubbed “Early Black Friday.” During the sell-off, over $640 million per hour in long positions were liquidated as Bitcoin (BTC) plummeted from $121,000 to $102,000. Open interest collapsed by 22% in under 12 hours, from $49.5 billion to $38.8 billion, in what Glassnode characterized as one of the sharpest deleveraging events in Bitcoin’s history.
Futures Activity Expanded Sharply
Futures activity has expanded sharply, with open interest climbing to a record $67.9 billion. Trading volumes in futures markets have also surged, reaching as high as $68.9 billion in daily turnover in mid-October, with perpetual contracts accounting for over 90% of the activity, according to the report.
Bitcoin Spot Volume Doubles
Notably, Bitcoin’s spot trading volume has also doubled compared to the prior cycle, climbing into an $8 billion to $22 billion daily range, according to Glassnode. During the October 10 crash, hourly spot volume spiked to $7.3 billion, more than tripling recent peaks, as traders moved in to buy the dip rather than flee the market.
Bitcoin Price Discovery Shifted Towards the Cash Market
The report posited that since the launch of US spot exchange-traded funds (ETFs) in early 2024, Bitcoin’s price discovery has shifted towards the cash market, while leverage has been increasingly built into futures. This shift has attracted capital to major assets, contributing to Bitcoin’s market share increase from 38.7% in late 2022 to 58.3% today.
Capital flows corroborate this trend. Monthly inflows into Bitcoin have ranged from $40 billion to $190 billion, elevating its realized capitalization to a record $1.1 trillion and channeling over $732 billion into the network since the 2022 cycle low, surpassing all previous cycles combined.
“This highlights a more institutionally anchored and structurally mature market environment,” Glassnode stated.
Bitcoin Competes with Visa as a Settlement Rail
The report also highlighted Bitcoin’s role as a settlement network, which is now rivaling the world’s largest payment rails. Over the past 90 days, the Bitcoin network processed $6.9 trillion in transfers, surpassing volumes handled by Visa and Mastercard during the same period. Concurrently, Bitcoin's supply is steadily transitioning away from retail trading venues and towards institutional holdings. According to Glassnode, roughly 6.7 million BTC are currently held across ETFs, corporate balance sheets, and centralized and decentralized treasuries. Since early 2024, ETFs alone have absorbed approximately 1.5 million BTC, while balances on centralized exchanges have decreased.
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