Ethereum saw even more severe deleveraging relative to its market size. Perpetual open interest fell from roughly $28 billion to between $19 billion and $20 billion on Oct. 10, representing a $9 billion to $10 billion drop.
Despite the larger institutional response in Ethereum ETFs, JPMorgan concluded that perpetual futures deleveraging drove price action in both assets, with ETF flows showing “little forced selling” relative to the derivatives cascade.
The data support the bank’s thesis. Ethereum’s open interest declined by roughly 35%, while Bitcoin’s fell by approximately 17%. However, both assets experienced a coordinated sell-off on Oct. 10 as leverage unwound across crypto-native venues.
Perpetual futures exaggerate moves because leverage forces trades. When prices break, margin ratios slip, and exchanges liquidate under-margined positions with market orders that hit thin books and trigger reflexive cascades.
Cross-margin amplifies the dynamic, as collateral marked to market shrinks as the asset falls, forcing accounts that appeared safe to breach maintenance thresholds and add more forced flow.
Funding rates offer the fastest tell. During a down flush, perpetuals typically flip to sustained negative rates with the perpetual trading at a discount to the spot index.
The turn arrives when funding grinds back toward zero while the perpetual premium or discount closes, ideally with price stabilizing on rising spot volume rather than perpetual activity alone.
Open interest provides the second pillar. A sharp drop in aggregate open interest alongside the sell-off means leverage left the system instead of rotating to new shorts.
Bitcoin’s 17% decline and Ethereum’s 35% decline in open interest both point to genuine deleveraging.
A constructive rebuild is slow and spot-led. Prices recover or remain at the base level while open interest rises modestly, funding stays near flat, and the perpetual basis remains tight.
A durable bottom after a perpetual flush looks like negative funding reverting toward zero, the perpetual discount closing, open interest resetting and rebuilding gradually, and the futures curve lifting back into mild contango.
