Recent volatility in the cryptocurrency market suggests that Bitcoin (BTC) is at risk of further loss of value, according to an analysis firm.
According to analysis by research firm K33, the increase in leveraged positions and the strong capital flow into Ethereum (ETH) could put the leading cryptocurrency under pressure in the short term.
K33 Research President Vetle Lunde stated in a report that Bitcoin futures contract open interest (OI) has reached a two-year high. According to the data, total open interest in BTC perpetual contracts has surpassed 310,000 BTC ($34 billion). An increase of 41,600 BTC has been recorded in the last two months, with a 13,472 BTC jump seen at the end of last week alone.
Lunde noted that aggressive long positions have increased in the market as funding rates have risen from 3% to 11% annually, and that this is similar to the leverage buildup seen in the summers of 2023 and 2024. Recalling that both periods resulted in sharp liquidation waves in August, the analyst said the consolidation process could last longer this time. Lunde warned, “The risks of a long squeeze are quite high in the short term. A cautious stance would be more sound until the excessive leverage is cleared.”
However, Lunde noted that despite Ethereum’s record-breaking dollar-denominated price, its long-term trend against BTC remains weak. 1-, 2-, and 3-year ETH/BTC yields remain in negative territory.
In past cycles, Ethereum’s record highs have often coincided with overall crypto market peaks. In 2017 and 2021, ETH’s surge, combined with altcoin booms and BTC stagnation, signaled market peaks. However, this time, BTC dominance stands at 58.6%, a stronger position compared to levels below 40% in previous cycles.
*This is not investment advice.