Binance’s derivatives market went through a sharp leverage «flush» on June 17. As CryptoQuant analyst Amr Taha notes, open interest in Bitcoin (BTC) fell by 18%, and in Ethereum (ETH) — by 25%, against the backdrop of the U.S. Federal Reserve’s (Fed) decision to hold rates.
Open interest — this is the aggregate volume of unclosed contract positions. Its sharp contraction usually means that traders are closing trades en masse and reducing risk rather than building up their bets.
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How BTC and ETH positions got wiped out
According to Amr Taha, open interest in Bitcoin on Binance dropped from $4.51 billion to $3.7 billion, and about $810 million in leveraged positions left the market. That is a contraction of roughly 18% and one of the largest one-off short-term declines in Bitcoin positioning on the exchange.
Ethereum showed an even sharper drop in percentage terms. Open interest in ETH on Binance fell from $2.8 billion to $2.1 billion, removing about $700 million in positions from the market. The current level is close to the readings of late February. This indicates that Ethereum leverage was being dumped more aggressively than Bitcoin’s.
On Binance alone, almost $1.5 billion in open interest «vanished» in Bitcoin and Ethereum over a short period. This points more to a general decline in risk appetite than to a sell-off in any single asset.
Why this is tied to the Fed
The leverage flush coincided with the Fed’s decision to hold the rate at 3.75%. Although the decision removed part of the uncertainty, derivatives traders apparently did not want to hold large leveraged positions ahead of the announcement itself and the volatility that usually follows such macro events.
In Amr Taha’s estimation, market participants chose to close positions both before and after the Fed’s decision so as not to be caught with leverage at the moment of a possible sharp market reaction. The simultaneous drop in both Bitcoin and Ethereum confirms that this was a broad move away from risk.
Source: BeInCrypto
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