Bitcoin’s [BTC] plunge wipes out $4B open interest, highest since mid-May sell-off

Bitcoin’s [BTC] brutal sell-off triggered a ripple effect that wiped out billions from the cryptocurrency market in a matter of hours in the September 7 flash crash. According to the latest stats, the Fear and Greed Index has slid out of the extreme greed territory.

El Salvador might have bought the dip, but the amount of losses reached the mid-May level. The market is currently reeling under significant bearish pressure, with many tokens breaching critical support levels. Evidently, there was a considerable liquidation of leveraged long positions.

OI Cracks

As matter of fact, during the sell-off, $4 billion in Bitcoin open interest [OI] was wiped out, according to the blockchain intelligence platform, Glassnode. As OI figures on perpetual futures dropped from $13.3 billion to $9.46 billion, the firm observed that this is the most notable leverage flush out since the sell-off of May this year.

In addition to that, for the first time since the beginning of August, the BTC funding rate for all cryptocurrency exchanges flipped negative. This is a prominent indicator signalling that more and more market participants are speculating on further declines and are prepared to pay extra to maintain their short positions.

A healthy event in Bitcoin market?

Almost all crypto-assets were flashing red. Many blamed the futures market for what was supposed to be a day filled with optimism as El Salvador adopted Bitcoin as a legal tender in a first. The sell-off in the BTC market, in particular, heightened due to excessively leveraged bullish bets. But many industry experts claimed that the plunge could potentially serve as a healthy event for the market and facilitate resetting the entire cryptocurrency ecosystem by eliminating these excessively leveraged trading positions.

On yet another positive note, the BTC balance on cryptocurrency exchanges continued to fall despite the strong sell-off yesterday, meaning, It’s not just El Salvador that has bought the dip, the investors have also resorted to accumulation.