How a Major Source of Market Stress in 2025 May Be Diminishing
Excessive leverage, a key driver of the October crypto crash, is significantly decreasing, potentially stabilizing the market.Summary
Despite positive market catalysts, the crypto market has struggled to recover following the October crash, which involved over $19 billion in liquidations, dubbed "Crypto Black Friday." This downturn was exacerbated by excessive leverage, which made the market hypersensitive to institutional outflows, leading to cascading sell-offs.
New data indicates that this major source of stress is diminishing. Bitcoin's Open Interest has dropped sharply, showing traders are closing futures and perpetual positions, effectively flushing leverage from the system. Historical data shows leveraged trades peaking in August-November but the 7-day average has drastically fallen.
While Bitcoin shows clear deleveraging, Ethereum's activity remains relatively higher, suggesting a shift in focus away from leveraged BTC trades. Analysts view this reduction in leverage as a positive sign, indicating that one of the primary structural risks is weakening, which could provide a more stable foundation for a future recovery.
(Source：BeInCrypto)