Bitcoin’s sharp slide to $81,119 on January 30 came with a derivatives-market gut punch: forced long closures spiked to extreme levels, yet perpetual funding stayed decisively positive. That mix is complicating a common read, whether the market has already “cleansed” leverage or is still set up for repeat liquidation waves.
Is The Bitcoin Deleveraging Over?
On-Chain analyst Axel Adler Jr., in his Morning Brief, pointed to a “cascade of forced closures” over the past 24 hours, with long liquidations dominating the tape. His liquidation dominance oscillator tracking the balance of long versus short liquidations, printed roughly 97%, while the 30-day moving average rose to 31.4%. In plain market-structure terms, that says deleveraging pressure has been heavily one-sided, not just on the day but as a sustained pattern through the last month.
The reason traders watch extremes like this is the tendency for liquidation flows to cluster and then fade, creating room for near-term stabilization. Adler framed that dynamic cautiously, stressing that an “extreme” reading is not the same thing as confirmation that sellers are done.
“Oscillator extremes often coincide with the culmination of forced selling and can lead to short-term stabilization. However, this is not a reversal signal without confirmations — for a sustainable ‘local bottom’ scenario, it is important to see at least normalization of the oscillator to zero or a decline in the 30-day average.”
That sets the first condition for calling the deleveraging cycle “over”: the liquidation imbalance has to cool, rather than simply peak.
The bigger tension in Adler’s read is that even after the washout in price and the liquidation cascade, funding remained positive: 43.2% annualized on the day, by his figures. While that’s well below the 100%+ annualized levels seen during October–November peaks, it still implies a market paying to stay long rather than getting paid to short.
Funding doesn’t just reflect sentiment; it reflects positioning pressure. If funding refuses to flip despite a selloff, it can mean longs are rebuilding exposure quickly, or that the market never fully unwound bullish leverage in the first place. Adler’s conclusion is that the latter risk is still on the table.
“Positive Funding amid massive liquidations increases the risk of repeated deleveraging: this means the market is recovering long positioning quickly enough or is not ready to fully unwind it. Complete ‘derivatives capitulation’ is often accompanied by Funding transitioning to neutral or negative territory — this has not happened yet.”
In other words, the liquidation event may have been violent, but the incentives embedded in perps are still leaning toward long demand. That matters because it keeps the same fragility in place: a fresh downside impulse can turn newly reloaded longs into liquidation fuel again.
Adler summed up the combined signal from the two charts as a washout that may be intense, but not necessarily final.
“Together, the two charts paint a picture of likely incomplete deleveraging: liquidations hit longs extremely hard, but overall positioning remains tilted bullish. The liquidation cascade (long dominance ~97%) is a symptom of market overload with long positions, but not necessarily final cleansing. Persistently positive Funding (43% annualized) may indicate that demand for long exposure is not broken, and the deleveraging process is not complete.”
Until those confirmations show up, the base case in his briefing is less “final capitulation” and more “incomplete deleveraging”, a market that has already flushed leverage once, but may not be done if long appetite stays intact through drawdowns.
At press time, BTC traded at $82,968.
