Bitcoin Falls as Leverage Washes Out
After Bitcoin dropped to $61,000, leverage in the market has been significantly reduced, leading to a deleveraging event.
Futures Market Deleveraging
Bitcoin’s futures market has seen a $5.2 billion decline in total value of contracts traded on major exchanges, with open interest standing at $28.3 billion.
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Geopolitical Tensions Impacting Crypto
- Geopolitical tensions in the Middle East and strong economic data in the U.S. have disrupted the crypto market.
- This has caused a sell-off in Bitcoin after reaching an all-time high of $73,000 last month.
Leveraged Long Positions at Extremes
Bitcoin futures saw a surge in open interest to $36 billion in March, indicating a high level of leveraged long positions in the market.
Funding Costs for Bitcoin Futures
- The cost of holding leveraged long positions in Bitcoin futures market rose to 25% annually.
- After a turbulent week, funding costs have dropped to 8%.
Bitcoin Liquidations
Over $90 million worth of Bitcoin liquidations occurred recently, with OKX and Binance accounting for the majority of them.
Severe Liquidations
- Previous days saw $1.8 billion worth of positions closed due to liquidations.
- Market participants had similar positions leading to cascading effects when selling pressure emerged.
Impact of Bitcoin Halving
Concerns about Bitcoin’s upcoming halving contributing to market volatility have subsided after the recent liquidation event.
Potential Cascading Pullbacks
- Fears of cascading pullbacks post-halving have eased as the market underwent a deleveraging event.
- The recent market turmoil may have preemptively cleared out precarious leverage in the market.
Hot Take
Bitcoin’s recent fall and subsequent deleveraging event have highlighted the risks of high leverage in the crypto market. As leverage unwinds, traders are reassessing their positions and funding costs, leading to a more stable market environment for Bitcoin futures.
