The cryptocurrency market experienced a sharp pullback this morning, which analysts are interpreting as a typical “liquidation drop” designed to clear leverage, rather than a sign of panic selling.
Experts suggest that if the volume of mandatory liquidations continues to decrease, the process of deleveraging in the market is nearing its end.
Market Sentiment and Indicators
CryptoQuant analyst Axel Adler stated in a social media post that between January 13-15, the Bitcoin: Advanced Sentiment Index indicator rose to approximately 80%, indicating an extremely optimistic market outlook. During this period, the Bitcoin price approached its local peak around $97,000. However, as of today, the index has sharply fallen to 44.9%, dropping below the neutral threshold of 50%.
According to Adler, this composite indicator combines volume-weighted average price (VWAP), net active volume, open positions, and the long/short spread. A drop below the neutral line indicates a deterioration in market structure and a weakening in risk quality. Adler stated that if the index rises back above 50% and remains there, this would be the first signal of stability, while a move towards the 20% downtrend could trigger a deeper correction.
Leverage Liquidations and Market Structure
In the first hours of today’s sell-off, over $205 million in forced liquidations occurred in a single hour. The spot oscillator rising to +97.96% indicates that almost all liquidations originated from long positions. The scale and speed of the liquidations reveal that this is a classic leverage liquidation seen in an overheated market, rather than voluntary selling.
Analysts believe that if the volume of mandatory liquidation gradually decreases in the coming hours, the liquidation process in the market may be largely complete, and prices could move towards a more stable structure.