Bitcoin is recovering after one of its sharpest corrections this year, with on-chain data suggesting the recent crypto crash may have set the stage for a healthier rebound.
Summary
- Bitcoin’s open interest plunged by $12 billion during Friday’s crypto crash, marking one of the steepest leverage resets in recent history.
- Key on-chain metrics, including funding rates and the Stablecoin Supply Ratio, point to stabilizing sentiment and rising liquidity.
- Digital asset investment products saw US$3.17 billion in inflows last week, with BTC leading at US$2.67 billion, demonstrating continued investor confidence.
Bitcoin saw one of the biggest corrections in its history on Friday during the market-wide downturn. According to a recent CryptoQuant analysis, open interest suffered a $12 billion drop, plunging from $47 billion to $35 billion.
The correction pushed the asset’s price as low as $102,000, well below its recent peak above $126,000, before buyers stepped in over the weekend to fuel its recovery. At the time of writing, BTC (BTC) has rebounded to around $115,117, up more than 3% on the day.
While the sell-off was painful for many traders, it may have marked a much-needed reset that could pave the way for longer-term gains. The analysis noted that funding rates, which turned negative during Friday’s capitulation, have stabilized back to modestly positive levels, hinting that sentiment is normalizing as extreme bearish bets unwind.
Additionally, the BTC Estimated Leverage Ratio (ELR), which tracks how much leverage traders are using relative to Bitcoin held on exchanges, also fell sharply to its lowest point since August. This drop suggests that excessive leverage has been flushed out, reducing the risk of further liquidations and signaling a broad deleveraging across the derivatives markets.
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Author: Grace Abidemi
