Bitcoin‘s recent drop to $61,000 has flushed out leveraged positions in the market, leading to a significant decline in the total value of futures contracts traded on major exchanges. According to Coinglass, the value of futures contracts has plummeted from $35.17 billion earlier last week to as low as $28.7 billion on April 18.
Analysts attribute this downturn to a deleveraging event caused by various factors, including escalating geopolitical tensions in the Middle East and stronger-than-expected economic data in the United States. The Bitcoin futures market had reached extreme levels last week, with funding rates, the cost of holding leveraged positions, for longs rising to 25% on an annualized basis. However, following the market turbulence, funding rates have fallen to 8%.
During this period, significant Bitcoin liquidations have also occurred, with almost $1.8 billion in leveraged positions being liquidated over April 12 and 13. On April 17 alone, almost $219 million in liquidations took place. The majority of these liquidations took place on OKX, amounting to $31 million, followed by Binance with $27 million.
With the Bitcoin halving upcoming, the recent market volatility may have already relieved some of the high leverage in the market, which could have made the halving a volatile event. Despite the strong fundamentals of Bitcoin, the absence of marginal buyers and the heavy skew of long leverage positioning can exacerbate market downturns, especially when triggered by a macro event.