Crypto Market Reclaims $3 Trillion for First Time Since January as Leverage Surge Fuels Volatility Warning
Summary
- The crypto market’s total market capitalization has climbed back to $3 trillion, but a surge in leveraged positions is increasing the risk of sharp price swings.
- Open interest (OI) in perpetual futures has risen to about $160 billion, while forced liquidations of short positions show traders are chasing the rally rather than cutting risk.
- Despite net inflows into U.S. spot Bitcoin ETFs and an altcoin rally, Lucas said a short squeeze does not create long-term holders, leaving the market focused on whether spot demand can replace liquidation-driven buying.
Forecast Trend Report by Period
The total market capitalization of cryptocurrencies has climbed back above $3 trillion for the first time since January, powered by Bitcoin’s sharp rally. But the rapid buildup in leveraged positions is also raising the risk of abrupt price swings.
Bloomberg reported on September 22, citing CoinGecko data, that the crypto market has recovered more than $740 billion in value since the U.S. Treasury announced an expansion of long-term bond buybacks last month. Bitcoin briefly rose to $87,381 during U.S. trading, its highest level since January, before slipping back to about $85,100 the following day.
Leverage has risen quickly alongside the rally. Total open interest in perpetual futures reached about $160 billion, the highest level since late October last year, according to CoinGlass. On Monday alone, about $920 million in short positions was forcibly liquidated as prices jumped.
Market participants are focusing on the structure of the rally. “Normally, when a short squeeze happens, open interest falls, but that hasn’t happened this time,” BTC Markets analyst Rachel Lucas said. “That means positions are being replaced immediately with new ones. Traders aren’t reducing risk. They’re chasing the rally instead.”
“That’s why the next 5% move in either direction will come faster than people expect,” she added.
Rising open interest in perpetual futures is a healthy sign when it is backed by spot buying, Caleb Lin, a senior sales trader at QCP Group, said. But if open interest grows faster than the spot market, trading becomes reflexive. Even a modest decline could trigger a chain of long liquidations.
Institutional inflows have also emerged. U.S. spot Bitcoin exchange-traded funds posted $593 million in net inflows over the two trading days of Thursday and Friday last week, returning to positive territory. Altcoins also joined the rally, with privacy coin Zcash gaining strength and Hyperliquid’s HYPE hitting a record high.
“A short squeeze creates price, but it doesn’t create long-term holders,” Lucas said. She added that the key issue for next week is whether spot demand will replace buying driven by forced liquidations.
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.