Bitcoin Market Faces 28% Deleveraging Reset – What's Next?

crypthub

about 5 hours ago

Bitcoin Price Decline and Market Volatility

Bitcoin's price fell to a new low in February, linked to overleveraging in the BTC market. A recent crash triggered a massive flush-out in Bitcoin derivatives on Binance, reducing the Estimated Leverage Ratio (ELR) significantly. This decline indicates reduced risk of liquidation cascades following the market correction.

Estimated Leverage Ratio and Market Health

The ELR metric, tracking average leverage on exchanges, dropped from 0.1980 to 0.1414, signaling a 28% decrease. This shift reflects a deleveraging event, with overleveraged long positions closing due to price declines. CryptoOnchain noted that reduced leverage improves market stability by eliminating the "derivatives bubble."

Current Market Conditions and Outlook

Bitcoin's price now stands at $67,950, showing a 2% rise in 24 hours but remaining down 1% weekly. Analysts emphasize the need for organic buying pressure and spot market demand to rebuild a bullish trend. The ELR's normalization suggests lower immediate liquidation risks, though sustained recovery depends on renewed investor confidence.