Daily Crypto Liquidations Surge Almost Threefold as Leverage Intensifies This Cycle

Daily cryptocurrency liquidations have nearly tripled this cycle, as increasing open interest and broader exchange activity contribute to a more leveraged market.

According to a recent report from Glassnode and Fasanara, the average daily liquidations of futures have escalated from around $28 million in long positions and $15 million in shorts in the previous cycle to $68 million long and $45 million short this time.

This was notably highlighted on October 10, during an event researchers termed “Early Black Friday.” In this sell-off, over $640 million per hour in long positions were liquidated as Bitcoin (BTC) dropped from $121,000 to $102,000. Open interest declined by 22% in under 12 hours, from $49.5 billion to $38.8 billion, marking one of the sharpest deleveraging events in Bitcoin’s history, according to Glassnode.

Futures activity has surged, with open interest reaching a record $67.9 billion. Daily trading volumes in futures markets have also increased, peaking at approximately $68.9 billion in mid-October, with perpetual contracts accounting for over 90% of the activity, as noted in the report.

Related: $19B crypto market crash: Was it leverage, China tariffs or both?

Bitcoin spot volume doubles

Interestingly, Bitcoin’s spot trading volume has also doubled compared to the previous cycle, moving into an $8 billion to $22 billion daily range, according to Glassnode. During the crash on October 10, the hourly spot volume surged to $7.3 billion, more than triple recent highs, as traders flocked to buy the dip instead of leaving the market.

The report states that since the introduction of US spot exchange-traded funds (ETFs) in early 2024, Bitcoin’s price discovery has migrated towards the cash market, while leverage continues to grow in futures. This transition has attracted capital into major assets, increasing Bitcoin’s market share from 38.7% in late 2022 to 58.3% today.

Capital flows reflect a similar trend. Monthly inflows to Bitcoin have varied between $40 billion and $190 billion, boosting its realized capitalization to a record $1.1 trillion and injecting over $732 billion into the network since the low of the 2022 cycle, surpassing all prior cycles combined.

“This signifies a more institutionally anchored and structurally mature market environment,” Glassnode remarked.

The current market cycle encompasses the timeframe from the November 2022 market bottom to the present. The previous cycle mainly referenced market activity during the 2021 bull market leading up to the 2022 crash.

Related: Bitcoin’s lack of price strength due to timid spot buyers

Bitcoin competes with Visa as settlement rail

The report also highlighted Bitcoin’s function as a settlement network, now competing with the largest payment systems worldwide. In the last 90 days, the Bitcoin network processed $6.9 trillion in transfers, exceeding the volumes handled by Visa and Mastercard during the same timeframe.