Author: Claude, Deep Tide TechFlow

Deep Tide Guide: As Bitcoin rebounded to $80,000 in early May, inflows into exchanges reached the fastest growth rate since 2026, with perpetual contract open interest touching $29 billion on May 5. Binance accounted for 32% of the incremental funding, with stablecoin reserves increasing from $49.9 billion to $53.1 billion. However, high leverage also buried hidden dangers, and BTC subsequently retracted to about $77,000 in the following week, resulting in the liquidation of $657 million in long positions.

A phenomenon you may have overlooked during Bitcoin's surge to $80,000 in early May was the most aggressive increase in derivative positions seen this year.

According to CryptoQuant data, the open interest of Bitcoin perpetual futures reached $29 billion on May 5, the highest level since January 29. The 30-day rolling increment reached $6.98 billion, also the fastest growth rate in 2026 to date. As funds flooded into exchanges, stablecoin reserves also climbed, and the trading volume of altcoin deposits surged to a four-month high.

CryptoQuant analyst Darkfost pointed out that this increase in open interest has exceeded the expansion at the time BTC reached its all-time high in 2025, indicating a visible enthusiasm among market participants. However, he also warned that the concentration of large long and short positions makes the market more fragile, and forced liquidations will amplify volatility once prices fluctuate sharply.

This warning was soon validated. On May 18, impacted by Trump's hints at possible military actions against Iran, BTC fell from above $80,000 to below $77,000 in one day, with $657 million in positions facing forced liquidation. As of press time, BTC was about $77,000, down about 6% from its monthly high.

Binance Captures One-Third of Incremental Funds, Increasing Concentration in Derivative Market

In this round of leverage expansion, Binance's dominance has further solidified.

According to CryptoQuant data, Binance's Bitcoin open interest reached $9.03 billion, exceeding the second-ranked exchange by 73%. Gate.io and Bybit followed with $5.3 billion and $4.7 billion, respectively.

From the perspective of incremental funding, it is even more concentrated: Binance's 30-day open interest growth reached $2.55 billion, accounting for 32% of all market inflows during the same period. Gate.io increased by $1.7 billion, and Bybit increased by $1.1 billion. According to Bitcoinist, Darkfost noted in his analysis for CryptoQuant that although the funding rates have been negative for the past few weeks, the open interest has still recorded the largest increase since 2026.

Negative funding rates mean shorts are paying for their positions, yet open interest has surged significantly. This contradictory signal indicates that new capital is building long positions in a "contrarian sentiment" against shorts, betting on the upward potential of BTC. In retrospect, this bullish force indeed pushed BTC to touch $82,855 temporarily, but the subsequent retraction also proved the fragility of high leverage.

Surge in Stablecoin Reserves, Exchanges Have Ample "Ammunition"

The increase in derivative positions is not an isolated phenomenon; liquidity on the spot side is also improving synchronously.

According to CryptoQuant data, the total USDT holdings of centralized exchanges rose from $49.9 billion on March 8 to $53.1 billion (in ERC20 token metrics). Among them, Binance's USDT holdings increased from $35 billion to $39.3 billion, with an increase of about 12%.

Binance now accounts for 67.02% of the total stablecoin reserves on exchanges, holding about $41 billion in USDT (including ERC20 and TRC20 tokens). OKX ranks second with 9.81%, while Coinbase Advanced and Bybit account for 7.45% and 7.4%, respectively.

The growth of stablecoin reserves is generally interpreted as the accumulation of "deployable funds." Funds transferred from external wallets to exchanges, converted into stablecoins, waiting for opportunities, indicate that purchasing power is accumulating rather than retreating.

In conjunction with ETF data, the net inflow into the US spot Bitcoin ETF in April was $2.44 billion, marking the strongest monthly performance since October 2025, indicating aligned funding signals from the institutional and exchange sides.

Altcoins Flooding into Exchanges: A Selling Pressure Signal or Capital Rotation?

CryptoQuant data shows that on May 6, the number of deposits for altcoin transactions at exchanges reached about 57,000, the highest level in nearly four months. Binance attracted the most altcoin deposits (about 16,400), followed closely by Coinbase (about 15,300).

The significant influx of altcoins into exchanges intuitively suggests a selling pressure signal. Tokens moving from wallets to exchanges typically indicate that holders are preparing to sell. However, when considered in conjunction with other data dimensions, this is more likely a capital rotation rather than a general retreat:

Simultaneous growth in USDT reserves at exchanges indicates that funds are not leaving the market, but rather being converted to stablecoins on standby; BTC open interest hitting a year-to-date high indicates that capital is flowing from altcoins to Bitcoin derivatives; Goldman Sachs completely liquidated its XRP and Solana ETF holdings by the end of Q1, increasing its bullish Bitcoin options positions instead, which is indicative of a similar "altcoin to BTC" transition by institutional funds.

This behavioral pattern is common during strong Bitcoin rebound phases: investors initially realize profits from altcoins, with funds flowing back into stablecoins or Bitcoin, waiting for clarity in market direction before redeploying. This creates short-term pressure on altcoins, but for the overall liquidity pool in the crypto market, funds are still circulating within the system.

The $80,000 Tug-of-War: Leverage Expansion Meets Geopolitical Risks

Looking back at the trend in the first half of May, BTC rose from $78,000 to $82,855, driven by three factors: continued inflows into ETFs, accumulation of funds in exchanges, and increasing derivative positions. On May 1 alone, the net inflow into the spot Bitcoin ETF reached $630 million. Strategy increased its holdings by about 20,000 BTC last week, pushing the total position to about 844,000 BTC.

However, high leverage itself is a source of fragility. The retraction on May 18 proved this: after Trump hinted at possible military action against Iran on Truth Social, BTC fell from around $81,070 at the beginning of the week to about $77,119, marking the worst weekly performance since February. The fear and greed index dropped to 28 (fear), and a reversal was also seen at the ETF level, with over $1 billion in net outflows for the spot Bitcoin ETF in one week.

Darkfost’s earlier warnings were validated here: the rapid expansion of open interest accumulated a large number of liquidatable positions in the market, and once external shocks trigger a price drop, forced liquidations will amplify the downturn.

Now, the liquidation of $657 million in long positions has objectively completed a round of leverage cleansing, and the market structure is healthier than before the crash.

There are three indicators worth monitoring going forward:

First, the stablecoin reserves at exchanges. The $53.1 billion USDT remaining on exchanges means funds have not left the market. The direction of this "dry powder" will determine the strength of the rebound: if stablecoins start flowing out of exchanges back onto the chain, that will be a true bear market signal.

Second, ETF capital flows. April saw a net inflow of $2.44 billion, but last week reversed with net outflows of over $1 billion. If ETFs experience net outflows for more than two consecutive weeks, it indicates a loosening of institutional demand support.

Third, the average purchase price of Strategy's $75,537 holdings. This is the nearest psychological threshold for institutions. If maintained, the narrative of "averaging down on dips" will continue; if broken, the market will lose the most stable buying power seen in 2026, and the next support will be at the April low of $74,900.