Bitcoin Market Moves Into A Lower-Leverage Environment – What This Means

Despite a brief bounce, Bitcoin is still struggling with heightened volatility, capping every upward attempt and keeping its price below the $65,000 mark. In this unfavorable market environment, the flagship asset may be entering a crucial phase as leverage steadily dries up across the market.

Moderate Leverage Turning Up On The Bitcoin Market

Bitcoin is seeing persistent bearish pressure, but a report shows that the market just made a major shift that could play a role in its short-term trajectory. As volatility builds, the BTC market seems to be moving into a lower-leverage phase as traders become more cautious and speculative excesses start to calm.

A recent analysis of the Bitcoin Leverage Pressure Zone by Joao Wedson, the founder of Alphractal and verified author at CryptoQuant, shows that BTC has left the extreme leverage phase and moved into moderate and slight leverage. This implies that the risk of large-scale liquidations, which frequently accompany highly leveraged conditions, has decreased as aggressive positioning in derivatives markets has subsided.

Since many traders were liquidated last week, the risk of forced liquidations is dropping significantly. However, Wedson highlights that the market has not yet reached the blue/purple zone indicated on the chart, which marks extreme deleveraging. 

In the past, this region was considered an ideal one to gain exposure with greater safety. The expert claims that the market has not yet gotten to that phase, but it will likely take a few more weeks or months before we reach that stage.

Even though it might occasionally indicate a declining risk appetite, lower leverage may indicate a healthier market structure based on higher spot demand rather than speculative momentum. Despite this shift into moderate and slight leverage, Wedson has urged investors to approach the derivatives market with caution. “If you do not understand its health, you can be liquidated at any moment, “ he added.

Small BTC Whales Are Now In Losses

With the Bitcoin market deeply in a volatile state, investors are beginning to feel the pressure of this downward action, even big investors. CW, a data analyst and investor, reported on X that small whales are now underwater as bearish performance mounts.

Here, small whales represent wallet addresses holding between 100 BTC and 1,000 BTC, and these investors have now returned to a loss position. This shift in profitability is attributed to the recent decline in BTC’s price to the $60,000 threshold.

In order for the group to return to profit territory, the expert stated that BTC’s price must bounce back to the $64,000 mark. CW added that the brief uptrend of Bitcoin started as these investors slowly approached the profit zone. In the meantime, recovering the $64,000 level is the first condition for the rise to kick off.

At the time of writing, Bitcoin’s price was trading at $63,370, and was showing a nearly 1% rise within the past day. While prices are slowly turning bullish, BTC’s trading volume within the same time frame has dropped by over 5%.