Bitcoin Enters Strongest “Cleansing” Phase of the Cycle: Leverage Evaporates, Short-Term Traders Flee
The Bitcoin market is facing a violent shakeout as leverage is narrowed across the board, leading to a wave of surrender from short-term traders. This development raises the question: is the correction bottom very close, or is the market still facing a difficult road ahead?
π© Leverage shrinks the most since 2022
According to new data from CryptoQuant, the Bitcoin derivatives market is witnessing the largest “leverage dump” period in the past 30 days. Open Interest (OI) has dropped sharply, erasing billions of dollars in leveraged positions.
Binance alone recorded more than 1.3 million BTC positions being closed.
This is a rare decline since the 2022 bear market, when the entire market was forced to liquidate en masse.
The contraction comes after weeks of continuous liquidations, forcing over-ambitious traders out of the market. Experts say:
Such sharp reductions in leverage often signal a new cycle bottom, as the market weans off the “hot speculation” part.
Bitcoin’s OI previously hit a record $47.5 billion, a level that was considered “dangerous” because it created the foundation for violent volatility.
π Short-term holders let go – Market sentiment turns around
Not only is leverage blown away, investor behavior is also changing direction:
Short-term holders are starting to surrender, turning to sell-offs.
The bullish sentiment has disappeared, giving way to cautious concern.
CryptoQuant warns that losing the $80,000 mark could usher in a deeper decline. However, they also emphasized:
"A 70% drop like previous cycles is very unlikely in the current environment."
π What makes this phase important?
The “leverage cleanup” phase is a natural part of a bull market. When the market has too many leveraged positions, even a small change in liquidity can cause:
Extreme volatility
Chain liquidations
Short-term deep corrections
But after this phase, the market usually:
β Stabilizes
β Creates a foundation for a sustainable uptrend
β Removes high-risk players
Therefore, the current cleanup could very well mark an important transition phase for Bitcoin.
β Quick Answer:
What is Open Interest?
This is the total value of outstanding derivative contracts. The higher the OI → the more leveraged the market → the greater the risk.
Why is the sharp drop in OI noteworthy?
Because it shows:
Leveraged traders are being forced out of positions
Market risk is decreasing
May signal a local bottom
Conclusion
Bitcoin is entering a “great cleanup” phase — something that often happens before the market makes a new bottom or prepares for the next rally. Key support levels need to hold, especially the $80,000 area.
This leverage squeeze may be painful in the short term, but it is a necessary part of creating the foundation for a healthier growth cycle.