Bitcoin (BTC) has entered a phase of exhausting consolidation, which the crypto community has already unofficially dubbed "chopsolidation." This period not only tests investors' nerves to the limit but methodically destroys those who too confidently use leverage in hopes of easy profits amid low volatility.
My analysis of data from Binance, which accumulates about 35% of all global open interest (OI) in Bitcoin, reveals a troubling pattern. Since the start of the year, we have observed two clear episodes where traders massively increased leveraged positions, believing the market was stuck in a "perfect sideways trend."
The first instance occurred at the end of January: over a month and a half, OI in BTC on Binance grew from 104,000 to 130,000 BTC, while the Bitcoin price fluctuated in a narrow range. The second episode, which began in early June, repeated the scenario—an increase of nearly 53,000 BTC over three months. In both cases, the accumulation period was followed by a sharp crash.
The Mechanism of "Washing Out" Positions
The key point I want to emphasize: each spike in open interest preceded the start of a new wave of decline. It was this correction that triggered a cascade of liquidations. Data shows that over two weeks, OI decreased by 36,000 and 35,000 BTC respectively. This is a clear illustration of how the market "washes out" excess leverage.
Notably, funding rates on Binance during these moments became predominantly positive. This is a direct indication of the dominance of long positions before the drop. Traders, gripped by FOMO, either tried to guess the perfect entry point or chased every bounce in fear of missing a bullish reversal. Reality, however, proved harsh: trading against the trend with leverage in such an uncertain environment leads to guaranteed losses.
Expert commentary from Cryptalist: The market once again reminds us of an old truth: you go up the stairs and down the elevator. Until Bitcoin shows a confident breakout of the current range with a corresponding increase in open interest, any attempt to "ride out" a correction with leverage is not a strategy but a gamble. Patience and risk management are now more important than chasing quick profits.