The Bitcoin market has gone through a major reset after a 28% drop in leverage, according to new on-chain data. The shakeout came after Bitcoin’s price fell sharply earlier this month, forcing many traders to close risky positions.
At the start of February, Bitcoin dropped to its lowest level since Donald Trump was elected in November 2024. Analysts believe the fall was partly caused by too many traders using heavy leverage, which made the market unstable.
New data shared on the CryptoQuant platform shows that the derivatives market saw a massive flush, especially on Binance, the world’s largest crypto exchange. The key indicator, called the Estimated Leverage Ratio (ELR), dropped from 0.1980 to 0.1414, showing a sharp reduction in risky trading activity.
The Estimated Leverage Ratio measures how much leverage traders are using compared to exchange reserves. Higher leverage means higher risk, because even small price changes can trigger large liquidations. When Bitcoin crashed, many overleveraged long positions were automatically closed.
Analysts say this painful reset may actually help Bitcoin in the long run. Removing excess leverage makes the market more stable and reduces the risk of sudden crashes caused by forced liquidations.
However, experts warn that Bitcoin still needs real buying demand from investors, not just speculative trading, to build a strong and sustainable rally. Without real demand, price growth may remain slow or unstable.
Despite the recent turmoil, Bitcoin has shown some recovery. According to data from CoinGecko, Bitcoin is currently trading around $67,950, up nearly 2% in the past 24 hours, although it remains slightly down for the week.
For now, analysts say the market looks healthier than before. But Bitcoin’s next major move will depend on whether investors return with confidence and long-term buying pressure.
