The derivatives market for Ethereum (ETH) is currently experiencing a significant deleveraging phase as the post-ATH correction continues to deepen. Open interest has dropped from $33.3 billion to around $11 billion, indicating a 66% decrease in leveraged exposure.
This deleveraging trend is evident across major centralized exchanges, with Futures trading playing a key role in driving liquidity.
Source: CryptoQuant
Binance has seen the largest contraction in open interest with a 68.2% drop, followed by OKX with a 63.5% decrease and Bybit with a 72.6% decline. The decline in open interest is primarily due to liquidations as traders who bet against the downtrend are forced to exit their positions.
The drop in ETH price from above $4,000 to around $1,900 has also led to a reduction in notional contract values.
Source: CryptoQuant
Market uncertainty and Bitcoin’s weakness have further dampened risk appetite, prompting traders to close positions proactively.
The contraction in open interest signifies a shift in market sentiment, as traders move away from speculative leverage towards more cautious, spot-based positions until confidence is restored.
Liquidation heatmap reveals long squeeze near $1.9K as leverage resets
The recent decline in Ethereum’s open interest coincided with visible liquidation clusters on Binance’s ETH/USDT pair.
As prices drop sharply, long-heavy positions trigger margin calls, leading to forced liquidations. This wave of liquidations is in line with the overall market trend, which saw approximately $189 million in liquidations over a 24-hour period, increasing volatility.
Source: CoinGlass
During the sell-off, the price passed through heavy leverage zones near $1,950 and approached the $1,900 level where liquidation pressure intensified. Previous downside movements also indicated vulnerability in the $1,800-$2,000 range.
As liquidations subsided, the market stabilized and the intensity of clustering decreased, signaling a reduction in excess leverage.
This transition suggests a cleansing of the market structure, allowing traders to adopt lower leverage ratios and more defensive positions, reducing systemic risk and promoting short-term stability.
The pullback in Ethereum’s price to $1,950 coincided with increased on-chain accumulation as investors withdrew tokens from exchanges. Exchange reserves dropped to 16.1 million ETH, a multi-year low, due to sustained selling pressure.
Source: CryptoQuant
As weak hands exited the market, long-term investors accumulated around 25 million ETH in early to mid-February.
The price stabilizing in the $1,900-$2,000 range indicates reduced distribution risk due to lower exchange balances. However, muted ETF demand could limit upside potential.
This cautious market behavior may indicate a shift towards long-term growth strategies rather than short-term speculation.
Final Summary
- Derivatives markets for Ethereum have seen a significant reduction in leverage, leading to a more cautious market sentiment.
- Exchange outflows and reduced supply absorption are helping stabilize the $1,900 price level.
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