Wintermute: The market structure looks healthier, and the market may continue to consolidate

Wintermute stated that although digital assets were initially dragged down by macro-driven pullbacks due to the stagnation of AI sentiment, and later impacted by the Federal Reserve resetting expectations, the internal structure of the market now appears to be substantially healthier. Major cryptocurrencies are showing clearer relative strength, market sentiment has completely cleared, and excess leverage has largely dissipated. The total open interest of perpetual contracts has decreased from about $230 billion at the beginning of October to about $135 billion today, primarily due to the deleveraging of long-tail assets and the exit of systemic capital flows. This shift has pushed market activity back to the spot market, where the depth and liquidity of the spot market remain better than expected during the thin trading holiday week.

When leverage is reduced so significantly and capital flows are dominated by the spot market, recoveries tend to be more orderly than the mechanically driven short squeezes earlier this year. Negative funding rates and reduced net short positions in perpetual contracts have also lowered the risk of further passive liquidations, which will provide more breathing room for the market if the macro environment stabilizes. The next few trading days will set the tone for how we enter the final month of the year, but after weeks of macro-driven pressure, the conditions for market consolidation are finally in place.