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Bitcoin‘s recent 22% rally from $63,500 to $77,700 has been accompanied by a notable decline in BTC-denominated open interest, which fell 11% to 312,600 BTC—the lowest level in nearly a month. According to Santiment, this divergence suggests the rally is being driven primarily by spot market demand rather than leveraged speculation, indicating a healthier market structure. While USD-denominated open interest rose 8%, this reflects price appreciation outpacing the decline in contract count. In the near term, Bitcoin faces approximately $408 million in short-squeeze risk at $78,180, while a drop below $76,500 could trigger roughly $375 million in long liquidations. The reduced leverage ratio significantly mitigates the risk of cascading liquidations, meaning even if a pullback occurs, selling pressure from forced liquidations would be substantially weaker.
Key Elements
Behind Bitcoin’s recent powerful rally lies a subtle but significant shift in market structure. On-chain data shows that between August 12 and 18, Bitcoin’s price climbed from approximately $63,500 to $77,700—a gain of 22%—yet the number of open interest contracts denominated in Bitcoin actually declined rather than increased, falling to its lowest level in nearly a month. This suggests the current rally is being fueled primarily by genuine spot market buying rather than the accumulation of leveraged speculative capital.
Data tracked by on-chain analytics firm Santiment indicates that during this rally, BTC-denominated open interest contracted from approximately 353,500 BTC to 312,600 BTC, a decline of roughly 11%. When measured in USD notional value, however, open interest actually rose 8%, as the magnitude of price appreciation exceeded the reduction in contract count. This divergence in measurement dimensions is a key signal market participants should heed.
Industry observers note that the liquidation of futures positions leading to a decline in actual contract count reflects a retreat in leveraged speculation. When upward price momentum is driven by spot demand rather than short-term leverage games, the sustainability of the trend tends to be more robust. In past market cycles, elevated open interest combined with rapid price swings frequently triggered bubble bursts and sharp reversals. The current decline in leverage ratios effectively mitigates the risk of large-scale cascading liquidations—even if the market pulls back, selling pressure generated by forced liquidations would be substantially diminished.
Santiment noted in an analysis posted on X that Bitcoin’s price reaching new highs without a corresponding increase in leverage directly contradicts the interpretation that “this rally is an overheated move fueled by leverage expansion.” The firm believes that some futures positions were liquidated during the price ascent, after which the market continued its upward trend with less leverage.
However, short-term liquidation risks have not been entirely eliminated. CoinGlass monitoring data shows Bitcoin faces approximately $408 million (about NT$13 billion) in short-squeeze liquidation risk near the $78,180 level. A breakout above this price would force a large number of short positions to close, potentially triggering an accelerating upward chain reaction. Conversely, if the price falls below $76,500, roughly $375 million (about NT$12 billion) in long liquidation pressure would be activated, potentially intensifying downward momentum.
The market currently sits at a high-volatility inflection point between bullish and bearish forces. The $78,180 level serves as a near-term resistance, and whether it is breached will be a key indicator for short-term directional selection. A breakdown below the $76,500 support level could trigger a stampede effect among long positions. Liquidation data itself is highly dynamic, with risk exposure shifting rapidly as new positions are opened or closed.
From a macro perspective, Bitcoin has maintained a range-bound pattern in recent weeks, with market participants closely watching macroeconomic indicators, regulatory policy developments, and shifts in institutional adoption trends. Regulatory clarity, the degree of institutional capital participation, and global economic conditions collectively constitute the deeper variables influencing market volatility.
Analysts believe the current shift in market structure carries significant implications. BTC-denominated open interest falling to a one-month low indicates that speculative fervor in the derivatives market is cooling, and spot-driven rallies typically rest on a more solid foundation. Investors should avoid misreading the rise in USD-denominated contracts as the beginning of a new wave of speculative activity. A comprehensive assessment combining multiple indicators is necessary to more accurately gauge the market’s true dynamics.
It is worth noting that liquidation price levels only reflect short-term technical changes and cannot alter Bitcoin’s long-term trajectory. Fundamental factors remain the core determinants of asset value. While monitoring short-term leverage effects, market participants should maintain rational judgment regarding long-term fundamentals.
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Source: finance.biggo.com