Bitcoin volatility shifts and rising altcoin leverage

The Bitcoin futures market has experienced a significant shift in dominance and volatility. Initially, Binance overtook CME Group in Bitcoin futures open interest for the first time since late 2023. This transition saw Binance holding approximately 148,500 BTC ($9.6 billion) compared to CME Group’s 102,840 BTC ($6.7 billion). The decline at CME Group was attributed to the unwinding of cash and carry basis trades as yields fell below U.S. Treasury rates, prompting market participants to migrate toward offshore perpetual contracts.

Following this shift, the market underwent a major deleveraging event marked by sharp liquidations and the unwinding of leveraged positions. Analysts identified this as the largest liquidation event of the current cycle. While the cooling of leverage may reduce future liquidation risks, observers noted that a sustainable recovery might depend on stronger spot buying.

More recently, Bitcoin’s 30-day realized volatility has dropped to the 1.5th percentile of its history, as long-term holders absorb supply. Despite Bitcoin facing resistance near $80,000, derivatives markets show a bullish tilt, evidenced by call options becoming more expensive than puts and US spot Bitcoin ETFs recording weekly net inflows of $681.2 million.

In a notable shift in trader positioning, altcoin open interest in perpetual futures has surpassed Bitcoin’s for the first time since December 2024. This trend is led by assets such as Zcash, which reached a record open interest of $2.4 billion. In the Bitcoin derivatives space, a recent price retest resulted in approximately $453 million in long positions being liquidated.