Bitcoin takes the market by storm: Cryptocurrency market capitalization returns to $3 trillion, and high-risk leveraged bets continue to pile up

The Zhitong Finance App notes that, driven by Bitcoin's astonishing rise, the market value of digital assets has returned to the $3 trillion mark for the first time since January, yet traders are also flocking to leveraged bets on perpetual contracts, increasing the risk of rapid price fluctuations.

CoinGecko data shows that since the US Treasury announced last month that it would increase long-term treasury bond repurchases, the market capitalization has increased by more than 740 billion US dollars. Leverage is also accrued along with the increase. According to Coinglass data, the total number of open positions for each token perpetual contract has climbed to nearly US$160 billion, the highest level since the end of October last year.

Total cryptocurrency market capitalization surpasses $3 trillion

More than $9.2 billion of short bets were liquidated on Monday as Bitcoin's price soared. Continued closing of short positions may trigger a shorting market, as traders will rush to buy back assets to close their losing positions, thereby putting further upward pressure on prices. However, open positions are still rising, indicating that even if bears are squeezed out of the market, new leveraged positions are still entering the market.

BTC Markets analyst Rachel Lucas said “shorting usually destroys open contracts,” “but not this time around, which means positions are being replaced immediately. Traders are chasing gains rather than taking advantage of the opportunity to deleverage. That's why the next 5% fluctuation in any direction will be faster than people expected.”

Bitcoin fell back to $85,100 on Tuesday after it surged nearly 8% during the US stock trading session to hit $87,381, the highest level since January.

Cryptocurrency perpetual futures contract volume hits 11-month high

Reversal risk

Perpetual contracts — a type of contract with no fixed expiration date — are the largest cryptocurrency trading category by volume, and are an important indicator for measuring speculative positions.

The current combination of “an increase in the number of open contracts and the closing of short positions at the same time” shows that this round of growth is not as simple as closing short positions and reducing leverage. These positions are being replaced by new exposures, which means that no matter which direction the price moves, it could trigger a wave of short liquidations or trigger leveraged long positions to close.

Caleb Lin, senior sales trader at QCP Group, said, “The most important thing to pay attention to is that leverage is ahead of spot.” “The rise in open perpetual contracts is healthy when the spot rises at the same time. When it accumulates faster, the market becomes more reflective: a gentle pullback triggers bulls to liquidate, which in turn lowers prices and forces further deleveraging.”

Caleb Lin added that it was this mechanism that drove the price above $83,000 and pushed the bears out. “In a situation where the spot market is weak, the accumulation of long leverage will create the same situation in the opposite direction.”

This latest round of gains comes at a time when institutional interest in Bitcoin and certain small-cap tokens is heating up. U.S. spot Bitcoin ETFs turned net inflows over the weekend, attracting a total of $593 million in capital inflows on Thursday and Friday.

Altcoins have also joined the upward trend, with privacy-focused Zcash rising sharply, while HYPE, the native token of the Hyperliquid blockchain, soared to a record high.

Currently, traders are unsure whether this round of gains will continue.

Lucas said, “Empty energy creates prices, but it doesn't create long-term holders.” “I'll see if spot demand will replace this forced compensation in the coming week.”