btcliquidations

$BTC Nearly all forced liquidations in Bitcoin futures markets recently have been from long positions, with a 97% share reported. The 30-day moving average liquidations indicator rose to 31.4%, reflecting sustained systemic selling pressure on buyers over the past month. Notably, despite steep price declines and cascading liquidations, the funding rate for Bitcoin perpetual contracts remains positive at an annualized rate of 43.2%, though lower than previous peak values above 100% from late 2023. This persistence of positive funding rates indicates continued dominance of longs in the market and suggests that deleveraging—where traders reduce risky leveraged exposure—is incomplete.
Market Sentiment
Investor sentiment shows clear ongoing optimism or expectation of price increases, as shown by the positive funding rates which incentivize short sellers to pay longs. However, persistent forced liquidation of longs reveals underlying anxiety and caution among leveraged traders, creating a tension between hope for upward movement and concern over volatility risks. Social media and trading forums likely reflect debates about the sustainability of this positive bias amid adverse price action, producing uncertainty. Quantitatively, the funding rate staying significantly above zero despite sharp declines signals that market participants remain engaged with leveraged long positions rather than fully retreating.
- Past: Previous episodes where funding rates stayed positive amid liquidations occurred during late 2023, with peaks above 100%, which sometimes preceded sharp price corrections followed by renewed rallies, demonstrating that markets can quickly rebuild leverage.
- Future: Given similar patterns, the Bitcoin market may experience further rounds of volatile price swings with liquidations as longs attempt to re-enter positions, posing risks of sudden drawdowns if funding rates eventually shift negative. Technical levels to watch include support zones where liquidations cluster and funding rate thresholds approaching zero, which could signal a more complete deleveraging ahead.
The ongoing long liquidation dominance and positive funding rates suggest elevated systemic leverage and increased risk of cascading liquidations if market sentiment turns sharply bearish. This environment can exacerbate short-term price volatility and may lead to rapid price shocks impacting correlated crypto assets and derivatives products. Additionally, sustained high leverage impairs market stability, increasing the probability of abrupt trend reversals that amplify investor losses and risk management challenges.
Investment Strategy
Recommendation: Hold
- Rationale: The market shows conflicting signals with aggressive long liquidations combined with sustained positive funding rates indicating incomplete deleveraging. While this environment carries significant volatility risk, it also reflects persistent buying interest, suggesting restraint rather than full exit is prudent.
- Execution Strategy: Maintain current long positions while closely monitoring funding rates and liquidation trends. Use trailing stops to protect gains against sudden downturns and consider partial rebalancing if funding rates decline toward neutral or negative levels.
- Risk Management: Keep stop-loss orders tighter due to increased volatility, ideally within 5-8% below entry levels. Diversify holdings to mitigate sector-specific risk and watch for shifts in sentiment indicated by funding rate contraction or major breaches in technical support.
- This cautious holding approach follows institutional investor practices to avoid panic selling while preparing for potential price swings, balancing opportunity with risk management.