Analysis: Bitcoin Underwent Its Sharpest Deleveraging Since 2023, CryptoQuant Analyst Says

The Bitcoin market has just come through its most intense deleveraging phase since 2023, according to an analysis by on-chain analyst Darkfost.

In a CryptoQuant post on September 7, Darkfost wrote that Bitcoin had "just gone through the strongest deleveraging phase since 2023." In a cycle dominated for an extended period by futures trading volume, the recent correction was a process of flushing out accumulated leverage.

That was evident in a sharp drop in Bitcoin open interest on Binance, the world's largest digital-asset exchange. Darkfost said open interest fell far below its 180-day moving average, underscoring the speed and severity of the deleveraging.

He described the move as a necessary correction for the Bitcoin market. During a correction, excessively crowded positions are either forcibly liquidated or closed through investors' stop-loss selling. Across both long and short positions, Bitcoin experienced one of the largest liquidation events in its history during this cycle.

Leverage has not been fully eliminated, however. Binance's Bitcoin open interest currently stands at about $9.6 billion, still above the 180-day average of $8.3 billion. Binance also accounts for about 37% of total Bitcoin open interest.

Darkfost said traders are already showing signs of re-entering the market, helping trigger a strong rebound in Bitcoin. He added that if excessive leverage builds again, it could set off another sharp deleveraging event, making it necessary to keep watching the pace of leverage reaccumulation.