When I view this cycle, I observe one larger concept replicating itself again: liquidity is becoming more concentrated, and leverage is being eliminated. That is one side of the coin of the chart of stablecoin reserves that you shared. The alternative is what is taking place in Bitcoin derivatives: the market is actively risk-cutting.

And this is why this new data point is important.

The Fall in Open Interest 55%

The Open interest of Bitcoin has declined by approximately 55 percent since its high in October in 2025 and some sources refer to it as the largest decline since April 2023.

In simple terms, open interest is the number of contracts of futures that are yet to be closed out in exchanges. When it drops this much, then generally it is an indication that people are unwinding their borrowed positions, whether voluntarily or due to forced liquidations, or margin pressure, or cutbacks by risk teams.

What is the meaning of open interest in the real market behaviour.

I do not consider open interest as a figure of a trader. I see it as a stress gauge.

The open interest is high indicating that the market is saturated with leveraged bets on both sides. That can accelerate price, but it also renders the market weak, inoculation forced closing has a domino effect. When the open interest is collapsing then it is usually signaling that the market is paying off debt and this may be detrimental in the short term but is more healthy in the long term.

Glassnode indicates that open interest of futures is the sum of money deposited in open futures contracts in exchanges- the size of open derivatives positions.

The why now: this is a leverage unwind, and not a clean out of crypto.

The interesting thing is as follows: a fall in open interest does not necessarily indicate the people are not bearish on long-term basis. It simply can imply that the market is taking a temporary hiatus of the risky behavior.

The most recent commentary at CryptoQuant suggests that the derivatives open interest continues to decline and a mere cycle: when the market is excited, the open interest increases, and when the trade is crowded and the risk turns against it, the open interest starts to plummet even faster.

The 55% decline thus comes out as: There were too many leveraged bets on. Now they’re being cleared.”

Why this is referred as the steepest one since April 2023.

The April 2023, which is remembered as a post-shock period, is one on which positions were cleared and leverage ceased to push the price in the short term. That is the reason why it is compared by analysts to this fall.

The most important trend is not the date. The trend is the habit: as the uncertainty increases, open interest does not decrease gradually, it usually snaps down.

The veiled form: of what kind is this open interest the dwelling place?

Majority of individuals discuss open interest as though it is single pool. It’s not.

The BTC open interest of most of the crypto futures is on crypto-native exchanges and a significant portion of the futures on regulated exchanges such as CME. We see Binance as a leading location in derivatives open interest on the average in their analysis.

That is important since not all the venues are affected by paying off leverage. Divans are at times emptied of retailers. In some cases, institutional positions do not disappear, they transform. The leveraging is sometimes transferred to a different exchange. Market may appear dead in one location yet lively in other locations.

The market twisting its finger off the trigger.

The following is a conscious meaning that I keep coming back to.

The open-interest decline of 55 percent means that traders are focusing on survivability rather than aggressiveness. They are opting to spot, opting to patience, opting to smaller size, or just remain with stablecoins waiting to see a better day. And that brings right back to your stablecoin liquidity concept: as soon as leverage cuts down, cash becomes the bludgeon.

Such a severe decline in open interest can also be the market acknowledging: we are not yet in a clear direction, so we are cutting forced risk.

The after effect of large open-interest resets?

I have found these cycles to be quite instructive in that big open-interest resets tend to accomplish three things.

First, they decrease the possibility of chain reactions in the liquidation process since less crowded leverage is available to crowd. Second, they are able to smooth volatility at least temporarily- until fresh positions accumulate once again. Third, they establish a more definite setting in which the following trend may emerge since the price will no longer be so dominated by compelled unwinds.

That doesn’t mean “up only.” It implies that the market has eliminated one of the significant causes of instability excess leverage.

The moral of the story: stablecoin liquidity will increase with leverage drained.

Had I to bind your original theme and this open-interest theme with one sentence, it is this.

Coins in exchanges depict the area the market is holding ammo. Open interest collapsing indicates that the market is dropping down grenades. It is not a mere mixture--that is what markets do when they cease to be greedy and are becoming alarmed.

And data is very clear right now, leverage has been significantly reduced and the market is not gearing up to the next stage with maximum leverage; rather it is gearing up with cash.