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A Brief Look at Market Structure

Aug 26, 2021 · 4 min read

By Ashwath Balakrishnan, and Jeremy Ong

Market Update

The markets are red again, with BTC and ETH both nuking into the Asia session and consolidating near the lows for the rest of the day. After a splendid run, AVAX is down 18% over the last 2 days, and Avalanche ecosystem coins took a hit too. But the degen hit SAFEMOON and FTX sweetheart SOL are unfazed by the downturn.

Leverage Impact

We’ve often tried to use different measures to gauge the level of leverage in crypto markets. Another useful metric is the ratio between BTC’s open interest across futures and perps, and its total market cap. When the ratio is rising, open interest is growing faster than market cap and vice versa. On its own, this probably isn’t a very useful data point. But with the added context of price and trend structure, we can actually pull away some useful insights. Look at the leverage ratio and price during Mar. 2020, Jul. 2020, and Apr. 2021. In all 3 instances, we saw open interest grow faster than mark

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