The sharp decline in the morning hours is interpreted by analysts as a typical "liquidation dip" aimed at offsetting leverage, rather than a panic-driven sell-off.
Experts indicate that if the volume of forced liquidations continues to decrease, the market's delegitimization process is nearing its end.
The CryptoQuant analyst, Axel Adler, stated in a social media post that between January 13 and 15, the Bitcoin: Advanced Sentiment Index rose to around 80%, indicating an extremely optimistic market outlook. During this period, the price of Bitcoin approached its local peak around $97,000. However, to date, the index has drastically fallen to 44.9%, dropping below the neutral threshold of 50%.
According to Adler, this composite indicator combines the volume-weighted average price (VWAP), net active volume, open positions, and the long/short spread. A drop below the neutral line indicates a deterioration of market structure and a weakening of risk quality. Adler stated that if the index exceeds 50% and remains at that level, this would be the first sign of stabilization, while a movement towards a bearish trend of 20% could trigger a deeper correction.
In the early hours of today's sell-off, forced liquidations exceeding 205 million dollars occurred in one hour. The upward spot oscillator at +97.96% indicates that the liquidations mainly involved long positions. The magnitude and speed of the liquidations suggest that this is a classic unwinding of leverage observed in an overheated market, rather than voluntary selling.
Analysts believe that if the volume of forced liquidations gradually decreases in the coming hours, the unwinding of leverage in the market could largely be completed and prices could move towards a more balanced structure.
