Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at the deleveraging happening in the Bitcoin Futures market, with over $10 billion wiped out in three weeks.
$10B Bitcoin Futures Wiped Out in 3 Weeks
Back on the 17th of January of this year Bitcoin saw its open interest reach an all-time high of over $33 Billion. It marked an unprecedented level of leverage in the market. Political influence, with Donald Trump taking over as United States President, and his subsequent actions saw uncertainty form in the market which led to a wave of liquidations. This is known as a deleveraging event.
The instability linked to President Trump's decisions have led to panic and the market witnessed a massive liquidation of leveraged positions on Bitcoin. Over $10 billion in open interest was wiped out in just three weeks, according to on-chain analytics platform CryptoQuant. In a March 17 blog post, CryptoQuant noted that the $10B was erased between February 20th and March 4th of this year.
Bitcoin derivatives traders have since moved their focus towards a risk-off stance since BTC/USD reached all-time highs in mid-January. Many considered the downturn as a natural market reset, something which is natural and essential for sustaining a bullish continuation. CryptoQuant contributor Darkfost described the decline as a “natural market reset” and noted previous deleveraging events have historically paved the way for bullish continuations.
The 90-day rolling chart tracking OI changes notes the change in trend as it highlights such reset phases by identifying moments when the 90-day open interest change turns negative. At present the 90-day change in Bitcoin futures open interest has dropped sharply and now sitting at -14%. Historical trends would indicate that each past past deleveraging like this has provided good opportunities for the short to medium term, so the news is not all bad. Analysts have always felt that eliminating excessive speculation in these stages can provide a more stable basis for future growth.
Economist Timothy Peterson noted that April and October are usually when Bitcoin experiences the biggest seasonal gains. His most recent analysis notes that Bitcoin could potentially reach a new all-time high before June, with a median target estimated at around $126,000. As part of his “Lowest Price Forward” model, a model which estimates a price level that Bitcoin is unlikely to drop below in future trading, Peterson has indicated that Bitcoin’s price floor has risen to $69,000. He estimates it has a 95% chance of holding and past bull markets have shown that corrections like Bitcoin’s recent 30% pullback often precede strong rebounds.
https://x.com/nsquaredvalue/status/1900945275880866246
Another analyst, Kriptolik, noted that the derivatives market has seen a surge in activity since November 2024 and noted that stablecoin reserves on derivatives exchanges surpass those of spot markets. This has not translated into a direct price increase and it could indicate that Bitcoin may still face demand-side challenges. At the time of writing Bitcoin is failing to maintain levels above $85,000 as it continues to slump, as shown in the 3 month chart below.
https://www.coingecko.com/en/coins/bitcoin
Traders are concerned that the bull market has lost momentum as the selling pressure continues to persist. Benjamin Cowen, founder of Into The Cryptoverse, fuelled his concerns during his YouTube stream on the 15th of March when he noted that Bitcoin’s bull cycle could be in jeopardy if it drops below the 2024 highs. This would be a level below $70,000 and Cowen noted it would be similar to 2017 when Bitcoin retested the prior year’s high. Cowen feel's the bull market would be at an end if Bitcoin closed in the low $60,000s. He also noted that holding above $70,000–$73,000 would maintain the market’s structure. Bitcoin could then signal a macro lower high later in 2025 if it drops below this level, and this in turn could result in a more bearish outlook by Q3.
CryptoQuant analysts maintained their warning that the market is in a 'demand crisis' and currently spot market liquidity lags behind derivatives activity. This will remain until stablecoin distribution normalises, and means traders will be advised to exercise caution with high-leverage trades to avoid heightened risks. They went on to examine the market cap and realised cap of Bitcoin holders with major losses, and as part of the study they compared the current value of their holdings to the prices at which they last moved their Bitcoin on-chain. The study discovered that market capitalisation has dropped below realised capitalisation. What this means is that investors are locking in realised losses. A continuation of this trend would increase selling pressure on Bitcoin and could further impact its price in the short term.
https://x.com/cryptoquant_com/status/1901963647980630398
Have a great day.
Peace. CryptoGod-1.
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