Bitcoin in Confidence Rebuild After $19B Leverage Washout

The recent Bitcoin downturn represents more of a structural correction than fundamental weakness, according to market analysts. Thiago Duarte, Market Analyst at Axi, characterized the event as “a structural flaw magnified by excessive leverage and thin liquidity” that flushed out $19 billion in speculative positions. This massive deleveraging event cleared what many experts saw as unsustainable market conditions, with the sell-off targeting excess speculation rather than signaling a broader capital exodus from the cryptocurrency space.

The liquidation cascade has pushed Bitcoin into what Glassnode identifies as a critical technical zone between $108,400 and $117,100. Within this range, over 5% of Bitcoin’s total supply is now held at a loss, creating a pivotal moment for market direction. Glassnode’s Wednesday report warned that without a renewed catalyst to lift prices back above $117,100, the market risks deeper contraction, particularly if sustained trading occurs below the $108,400 support level, which would signal “structural weakness” and potentially trigger a more severe correction.

Market analysts present conflicting perspectives on whether the worst has passed. K33 Research struck an optimistic note in their Tuesday analysis, suggesting that similar open interest flushes “have tended to align with market bottoms,” indicating the selling pressure may have exhausted itself. Their research maintains that the foundation for recovery remains intact due to a “supportive backdrop, including expansionary policy expectations, high institutional demand, and pending ETF catalysts.”

Contrasting this view, Tim Sun, senior researcher at HashKey Group, emphasized the ongoing uncertainty, stating that “the crypto market is still in a confidence-rebuilding and bottom-forming phase.” Sun highlighted the critical dependency on macroeconomic conditions, pointing specifically to ongoing trade tensions and tight global liquidity as factors that could prolong this transitional period. The duration of this confidence-building stage, according to Sun, “largely depends on macro conditions,” creating an environment where market sentiment remains “highly sensitive to news flow and macro indicators.”

Robin Singh, CEO of cryptocurrency portfolio tracking and tax software Koinly, offered a conditional outlook: “If risk sentiment stabilizes, Bitcoin could retest the upper range fairly quickly. However, continued uncertainty around trade policy or U.S. inflation data could keep prices choppy through the next week or two.” This perspective underscores the market’s current wait-and-see mode, where directional momentum awaits clearer signals from both macroeconomic data and institutional behavior.

The path to sustainable recovery hinges heavily on the return of institutional participation, particularly through ETF channels. Glassnode takes a cautious stance, noting that Bitcoin’s recovery is contingent on the return of steady ETF buying and renewed on-chain accumulation. The cooling ETF demand observed last Friday represents a significant headwind that must be reversed for any meaningful price appreciation above the critical $117,100 resistance level.

Compounding the challenge, long-term investors have been trimming their holdings by approximately 300,000 BTC in total, indicating sustained profit-taking that adds downward pressure to the market. Tim Sun of HashKey Group noted that the recent deleveraging event “could temporarily slow institutional inflows,” creating additional near-term obstacles for price recovery. This combination of reduced ETF demand and long-term holder distribution creates a complex landscape for Bitcoin’s near-term trajectory.

Despite these headwinds, the structural cleansing of excessive leverage has potentially created a healthier foundation for future growth. The $19 billion washout removed what analysts described as unsustainable market conditions, potentially setting the stage for more organic, sustainable price discovery. The critical question remains whether improved macroeconomic conditions and renewed institutional confidence will emerge to capitalize on this reset market structure, or whether persistent global uncertainties will continue to suppress the recovery timeline.