Bitcoin’s $19 Billion Leverage Wipeout Leaves Market in Reset Mode

Bitcoin’s latest pullback has cleared the decks for a potential rebound, but conviction is scarce.

“It was a structural flaw magnified by excessive leverage and thin liquidity,” Thiago Duarte, Market Analyst at Axi, told Decrypt.

After a $19 billion leverage washout and cooling ETF demand last Friday, the market is now in a wait-and-see mode. Analysts say the sell-off was more structural than fundamental, flushing excess speculation rather than signaling a broader exodus.

It has also pushed Bitcoin into a critical zone, between $108,400 and $117,100, a range where over 5% of the supply is held at a loss.

Without a renewed catalyst to lift prices back above $117,100, the market risks deeper contraction, especially if there’s a sustained break below the lower limit of the said range. That would signal “structural weakness” and risk a deeper correction, Glassnode wrote in a report on Wednesday.

“The crypto market is still in a confidence-rebuilding and bottom-forming phase,” Tim Sun, senior researcher at HashKey Group, told Decrypt. 

“The duration of this stage largely depends on macro conditions,” Sun added, pointing to ongoing trade tensions and tight global liquidity.

Multiplying the headwinds are long-term investors trimming their holdings by roughly 300,000 BTC total, hinting at steady profit-taking.

​​Sun echoed uncertainty in the near-term future, noting that market sentiment remains “highly sensitive to news flow and macro indicators,”  and that the recent deleveraging event “could temporarily slow institutional inflows.”

Despite the near-term caution, K33 Research’s Tuesday note argued that similar open interest flushes “have tended to align with market bottoms,” suggesting the worst of the selling may be over.

The foundation for a recovery, according to K33, remains intact due to a “supportive backdrop, including expansionary policy expectations, high institutional demand, and pending ETF catalysts.”

“If risk sentiment stabilizes, Bitcoin could retest the upper range fairly quickly,” Robin Singh, CEO of a cryptocurrency portfolio tracking and tax software Koinly, told Decrypt. “However, continued uncertainty around trade policy or U.S. inflation data could keep prices choppy through the next week or two.”

Glassnode, however, takes a more cautious approach, noting that Bitcoin’s recovery is contingent on the return of steady ETF buying and renewed on-chain accumulation.