A "reset" is happening right before our eyes: The open interest (OI) of BTC futures has just experienced the largest drop in USD ever recorded.
The data you provided:
• OI peaked at nearly 92 billion USD
• Then dropped by 35% over about 6 weeks
• Touched a bottom of nearly 59 billion USD
• At the same time, about 1/3 of the remaining futures positions were liquidated
Why is this important? High OI is like "dense fuel". It is not inherently bad, but it makes the market prone to explosions: just a slight price move can trigger a cascade of liquidations that can spike volatility.
Bottom line: this OI drop is not necessarily a negative signal — it is often a cleansing. Leverage has been washed out, excessive speculation has been removed from the system, leaving behind a less fragile foundation. As the market becomes less explosive, it often:
• is less prone to "cascade liquidation"
• facilitates more "natural" price action
• opens the door for a more sustainable price discovery phase instead of erratic jumps due to leverage
In short: a significant reduction in leverage may be "painful" in the present, but it lays a strong foundation for the next phase.
