This morning’s sharp downturn in the cryptocurrency market is being viewed by analysts as a standard “liquidation event” designed to clear leveraged positions, rather than a result of panic-driven selling.
Specialists indicate that if the volume of forced liquidations continues to decline, it may signal that the market’s deleveraging phase is approaching completion.
CryptoQuant expert Axel Adler shared on social media that from January 13th to 15th, the Bitcoin Advanced Sentiment Index climbed to nearly 80%, reflecting an extremely bullish sentiment. During this timeframe, Bitcoin’s price neared its local high close to $97,000. However, as of today, this index has dropped sharply to 44.9%, falling below the neutral benchmark of 50%.
Adler explained that this composite metric integrates factors such as volume-weighted average price (VWAP), net active volume, open interest positions, and long/short ratio spreads. When it dips below the neutral mark, it suggests weakening market structure and declining risk appetite. He noted that if the index rebounds above 50% and sustains itself there, it would be an early sign of stabilization; conversely, a fall toward a 20% downtrend could provoke a more significant correction.
During today’s initial sell-off hour alone, over $205 million in forced liquidations were recorded. The spot oscillator surged up to +97.96%, indicating nearly all liquidations stemmed from long positions being closed out. The magnitude and rapid pace confirm this was a typical leverage liquidation event characteristic of an overheated market rather than voluntary selling activity.
Market watchers suggest that should mandatory liquidation volumes steadily diminish over subsequent hours, the deleveraging process will likely be mostly complete, paving way for prices to stabilize into firmer territory.
This content does not constitute investment advice.