Bitcoin’s recent dip down to $61,000 has led to a clear-out of leveraged positions in the market, causing a notable drop in the overall value of futures contracts traded on major exchanges.
Coinglass reports a plunge in futures contract value from $35.17 billion just last week to as low as $28.7 billion by April 18.
Analysts link this downturn to a deleveraging event influenced by several factors, including escalating tensions in the Middle East and unexpectedly robust economic data from the United States. Last week, the Bitcoin futures market hit extreme levels, with funding rates for long positions soaring to 25% on an annualized basis. However, in the wake of market turbulence, these rates have now fallen to 8%.
Alongside this, there’s been a notable occurrence of Bitcoin liquidations, totaling nearly $1.8 billion in leveraged positions liquidated on April 12 and 13 alone. On April 17, liquidations amounted to almost $219 million, with the majority concentrated on OKX ($31 million) and Binance ($27 million).
As the Bitcoin halving approaches, recent market volatility may have already eased some of the excessive leverage in the market, potentially mitigating the volatility typically associated with halving events. Despite Bitcoin’s solid fundamentals, the absence of additional buyers and the heavy bias towards long leverage positions can amplify market downturns, particularly when triggered by a significant macro event.