Bitcoin’s liquidation events no longer mirror the sharp swings of 2021, as lower leverage in the system has led to a different trading environment. According to blockchain firm Matrixport, despite daily liquidations occasionally reaching $600 million, Bitcoin prices have managed to find a bottom with minimal follow-through.
In a February 19 research note, Matrixport analysts highlighted a stark contrast between the current cycle and the high-leverage markets of 2020 and 2021. During the previous bull market, excessive leverage triggered extreme volatility, resulting in significant price swings. However, the present cycle is seeing a more controlled response to liquidations.
Lower Leverage and Strategic Trading
Independent analyst Markus Thielen attributes this change to relatively low leverage levels and a more strategic approach by traders in setting stop losses. The approval of spot Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission has also reinforced market confidence, reducing the likelihood of panic-driven sell-offs.
With Bitcoin no longer perceived as a high-risk asset, the focus has shifted from concerns over its potential collapse to evaluating how low it might correct during periods of market stress. While liquidation-driven sell-offs appear more contained, risks remain in the broader market landscape.
Bearish Signals in Bitcoin Market Indicators
Despite the more stable liquidation environment, analysts point to the Inter-exchange Flow Pulse indicator, which tracks Bitcoin movement between spot and derivatives markets. Typically, increased BTC inflows into derivatives platforms signal bullish momentum. However, the current readings indicate bearish sentiment, suggesting Bitcoin could face resistance before any significant breakout.
Bitcoin’s liquidation trends have evolved significantly since the last bull market. Lower leverage, improved trading strategies, and the introduction of spot Bitcoin ETFs have all contributed to a more stable environment. However, bearish signals from key indicators suggest that challenges remain before Bitcoin can push toward new highs. Investors should closely monitor market trends to assess potential resistance levels in the coming weeks.
