Bitcoin (BTC)‘s recent price correction, following its surge to a new all-time high above $69,000, has resulted in the closure of leveraged perpetual futures bets worth $1 billion across digital asset markets.
On Tuesday, the leading cryptocurrency experienced a 10% drop, falling to $59,700, prompting a significant clearing of excess leverage from the market.
According to data by CoinGlass, long and short traders suffered more than $1 billion in losses across major centralized exchanges over the past 24 hours.
More specifically, 296,908 traders have been liquidated, with the total long liquidations coming in at $817 million and short liquidations coming in at around $234 million.
Crypto exchange Binance took the lion’s share of these liquidations at over $401 million, followed by OKX at $367 million and Bybit at around $104 million.
Bitcoin-tracked futures experienced $309 million in both short and long liquidations over the past day while Ethererum-linked futures saw over $185 million in liquidations.
Price Corrections Normalizes Funding Rates
The recent correction has had a normalizing effect on the funding rates in the crypto perpetual futures market.
Annualized funding rates, which represent the cost of holding leveraged bets in perpetual futures tied to the top 25 cryptocurrencies, have now decreased to less than 20%.
This is a substantial decline from the triple-digit figures observed just days ago.
The cooling of the overheated perpetual futures market paves the way for a more sustainable upward move towards new record highs.
Funding rates had surged above 100% earlier in the week as Bitcoin’s strong bullish momentum attracted investors who sought to maximize their gains using leveraged products.
Exchanges employ the funding rate mechanism to ensure that perpetual prices align with spot prices.
A positive funding rate indicates that perpetuals are trading at a premium to the spot price, signaling increased demand for bullish bets.
Therefore, a high funding rate, as observed earlier this week, is often seen as a reflection of over-optimism, typically associated with interim market tops.
Analysts Expect Bitcoin to Maintain Momentum
Bitwise Chief Investment Officer Matt Hougan expects Bitcoin to soar beyond $80,000 this year thanks to the recent success of spot ETFs.
In a recent interview, Hougan highlighted the sustained demand for ETFs, which has exceeded his expectations.
He said that this wave of interest from traditional finance, akin to Bitcoin’s IPO in the US market, will lead to further institutional investment and drive up prices.
Likewise, billionaire investor Mark Cuban has said that he invested in Bitcoin due to its strong capability as a store of value.
“There’s only going to be 21 million of [Bitcoin]. The more people that buy and the fewer people that sell, that means the price is going to go up. That’s just the nature of it,” he said.
“It’s a great store of value. That’s why I have an investment in it. Because I do feel that the demand is going to exceed the number of people selling.”
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