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🇺🇸 Happy early 4th of July to all our readers.
We hope you’re not expecting a newsletter tomorrow — we’ll be on a lake with a cold drink, not watching liquidation charts.
But before we disappear into the sunset, let’s decode the leverage madness happening right now — because this market’s already lighting up like a fireworks finale.
🎯 TL;DR
Leverage isn’t just about risk — it’s how crypto breathes.
Most traders track liquidations or funding rates. But those metrics? Laggy, partial, flawed.
Today, we reveal a better lens: Leverage Position Openings & Closures (LPOC) — a more accurate way to read positioning in real time.
Using open interest + price trends, you can now spot:
Long squeezes
Short squeezes
Euphoria-driven tops
Capitulation bottoms
Let’s break it down 👇
📈 What Is Leverage in Crypto — and Why It Matters
Leverage means borrowing to amplify your trade size — and crypto traders love it.
Perpetual contracts (aka “perps”) often outpace spot volume by 5–10x, especially during volatile moves.
But if you only rely on liquidation feeds or funding rates to analyze leverage, you’re behind.
Here’s why:
Liquidations only show forced exits (when positions get auto-closed by exchanges). They don’t tell you when trades are opened or voluntarily closed.
Funding rates are slow to react and don’t reflect size or direction — especially during rapid moves.
👉 So how do you really know what kind of leverage is in the system?
💡 A Better Tool: LPOC (Leverage Position Openings & Closures)
This new framework looks at how price and open interest (OI) move together or diverge.
🧠 Open interest = total number of open contracts
When OI goes up, it means new positions are being opened (longs or shorts).
When OI goes down, positions are closing.
So:
Price ↑ + OI ↑ = Longs opening
Price ↓ + OI ↑ = Shorts opening
Price ↓ + OI ↓ = Longs closing (long squeeze)
Price ↑ + OI ↓ = Shorts closing (short squeeze)
This logic is asset-agnostic — works for BTC, ETH, SOL, anything with perp markets.
🧪 Bitcoin: Bottom Signals from Long Closures
In Bitcoin’s past cycles, spikes in long closures (OI + price dropping) often signal capitulation lows.
See June 2020, mid-2021, and late 2022.
These moments usually come right before a bounce.
When everyone’s panicking and bailing on leverage?
That’s often when smart money steps in.
📉 Tops and Froth: Long Openings Gone Wild
When OI surges with price, and everyone’s jumping into longs…
It’s a warning sign.
Tops often follow peaks in long positioning.
It’s even clearer in ETH:
Every time long positions ramp up fast — we top out soon after.
🟥 Long vs Short Dominance Zones
This chart shows which side is dominant:
Red = Long dominance (usually during price climbs)
Green = Short dominance (usually during downtrends)
But what matters most:
When the intensity fades — the trend often flips.
So spikes in red or green that suddenly cool off?
Could mean the market is ready to reverse.
🔍 Case Study: The FTX Crash in BTC & SOL
BTC (Nov 2022):
Event 1: Shorts closing before the collapse
Event 2: Panic long closures as BTC tanks
Event 3: Short squeeze rebound as BTC recovers
SOL (same timeframe):
Massive long liquidations under $10
Fast rebound → shorts pile in again
Multiple short squeezes as SOL rockets to $20+ in a month
This is mis-positioning at scale.
Everyone got caught wrong, over and over — and the LPOC metric picked it up each time.
🌐 Cross-Asset Heatmap: Market-Wide Flushes
Zooming out, we can apply this metric across the entire altcoin market.
During May 2021 and Nov 2022 crashes, long closures spiked across the board.
The result?
Market-wide bottoms — often followed by large rebounds.
✅ Real-World Uses: How You Can Apply This Today
Buy the Blood: When long closures spike across assets, it’s often a bottoming signal
Avoid the Top: If long openings go vertical — might be time to de-risk
Spot Squeezes Before They Trigger: Shorts opening + OI surging = short squeeze potential
Check Market Health: Are we over-levered across the board? Or clean and ready for upside?
🔭 Future Upgrades to Watch For
Faster refresh rates: Right now, best for multi-day to multi-week insights
More nuance: Eventually, we’ll be able to track mixed positioning with probabilities, not just one dominant signal
Smart integrations: Combining LPOC with social sentiment + inflows will give us an edge against pure quant data
🧠 Final Nugget
The crypto market isn’t just driven by fundamentals or news — it’s driven by who’s long, who’s short, and who’s about to get wrecked.
The LPOC framework gives us a clearer way to spot those imbalances before they unwind.
Add this to your toolkit — and you’ll start seeing moves before they happen.
-Cole 🍻