In the wake of Bitcoin’s recent steep downturn, Matthew Sigel, who leads Digital Assets Research at VanEck, released an in-depth market review.
Sigel explained that the drop was mainly driven by the rapid reduction of excessive leverage and noted that Bitcoin is nearing a technical “oversold” condition.
He highlighted that over the past week, Bitcoin’s price has declined roughly 19%, settling around the mid-$60,000 range. This decrease wasn’t triggered by a single massive liquidation event but rather by a swift unwinding of historically elevated leveraged positions.
The open interest in Bitcoin futures contracts contracted sharply—over 20% within just days—falling from $61 billion last week to $49 billion. Sigel pointed out that since early October when open interest peaked above $90 billion, overall market leverage has dropped more than 45% from its highest point.
Reports indicate liquidations totaling between $3 and $4 billion occurred across cryptocurrency markets during this period, with Bitcoin futures accounting for approximately $2 to $2.5 billion. Sigel described this as “noteworthy but not indicative of panic-level selling.”
The pressure on prices wasn’t solely due to derivative deleveraging; weakening enthusiasm for artificial intelligence (AI) investments also dampened risk appetite. Investors are beginning to question whether large-scale infrastructure projects and data center expansions remain sustainable.
This environment is placing additional strain on Bitcoin miners attempting to pivot their operations toward AI and high-performance computing (HPC). With tighter financing conditions coupled with falling BTC prices, some miners have resorted to selling assets directly on spot markets to bolster their financial standing.
Transparency concerns within the crypto sector have resurfaced recently as well. Sigel referenced news about ownership changes at World Liberty Finance—a company linked with the Trump family—which reignited calls for regulatory oversight. He argued that legislation like the Clarity Act under consideration in the US could help reduce ambiguity through standardized reporting requirements and enhanced transparency measures.
While Bitcoin faces an approximate 50% decline from its peak so far, volatility remains subdued compared with previous bear markets. The current 90-day volatility hovers near 38%, notably lower than over 70% observed during last year’s downturn according to Sigel’s analysis.
The accompanying chart suggests this sell-off unfolded more methodically than past crashes; unless fresh negative events specific to Bitcoin arise soon, much of the downside risk may already be priced in by investors.
A renewed debate has emerged regarding quantum computing’s potential threat to Bitcoin security—with some proposing a soft fork update aimed at “post-quantum” resilience—but core developers maintain such risks are not imminent concerns in short-term horizons.
The four-year cycle theory continues influencing investor sentiment: historically it takes around 384 days on average for BTC prices to move from peak through trough phases. However, these cycles rarely progress smoothly; sharp rebound rallies often punctuate downtrends along the way.
Lately signs of stress appear within derivatives markets: Ethereum and Solana perpetual funding rates have turned negative across many exchanges—a pattern typically associated with short-term market bottoms—while bitcoin funding rates remain slightly positive yet pressured relative to historical norms indicating balanced long-short positioning among traders according to Sigel’s observations.
Momentum indicators such as RSI on continuous bitcoin futures charts dipped below level 21 into oversold territory—a threshold which historically signals potential stabilization followed by recovery rallies according to past trends noted by Sigel.
Despite prevailing bearish headlines surrounding cryptocurrencies right now, Sigel believes this correction phase might present attractive entry points for long-term investors.
“From my perspective,” he shared, “the magnitude of this pullback combined with ongoing deleveraging makes it increasingly appealing for adding exposure over one-to-two years rather than trying short-term timing. I increased my spot bitcoin holdings today.”
*This commentary does not constitute investment advice.*