Bitcoin’s Price Recovery Masks Growing Risk From Overleveraged Long Positions
After going through challenges final week, Bitcoin (BTC) has regained energy, igniting optimism amongst derivatives merchants. Bullish positioning has elevated sharply, pushing key indicators to notable highs.
However, predominantly destructive exchange-traded fund (ETF) flows and weakening institutional demand are fueling issues over elevated long-liquidation threat.
Bitcoin Derivatives Turn Bullish Despite Soft Spot Demand
Bitcoin opened 2026 with robust upside momentum, gaining greater than 7% within the first 5 days of January. Nonetheless, a correction briefly pushed the asset below $90,000 late final week.
Since Sunday, Bitcoin has stabilized and returned to constructive territory, buying and selling largely within the inexperienced amid comparatively subdued volatility. At the time of writing, Bitcoin traded at $91,299, down 0.81% over the previous 24 hours.
The rebound has sparked bullish sentiment within the derivatives market. Data from CryptoQuant revealed that the Taker Buy/Sell Ratio climbed to 1.249 at the moment. This is the best degree since early 2019.
For context, the Taker Buy/Sell Ratio measures the steadiness between aggressive buying and promoting within the derivatives market by evaluating the quantity of purchase and promote orders executed at market value. A ratio above 1 signifies that bullish sentiment is dominating. Additionally, a ratio under 1 indicators stronger bearish sentiment.
The surge in aggressive shopping for coincides with unusually elevated lengthy publicity amongst prime merchants. Joao Wedson, founding father of Alphractal, famous that lengthy positions held by massive merchants have reached their highest degree on document.
Such focus of leverage on one facet of the market can enhance the probability of sharp, liquidation-driven value strikes.
“This partially explains the liquidity hunts carried out by exchanges, pushed by high-capital merchants. Exchanges don’t actually care about retail merchants — what they need are rich merchants positioned within the flawed course,” Wedson wrote.
Additional market indicators reinforce issues round elevated lengthy threat. Data from SoSoValue showed unstable ETF demand. While the funds noticed robust inflows in the beginning of the month, they reversed shortly after, with $681.01 million exiting the funds final week. Still, the ETFs pulled in $187.33 million on Monday.
“With a median realized value round $86,000, nearly all of ETF inflows that entered because the October 2025 ATH are actually sitting at a loss. More than $6 billion has exited spot Bitcoin ETFs over the identical interval, marking an all-time document since their approval,” analyst Darkfost stated. ” With Bitcoin liquidity remaining periodically skinny, the impression of ETFs turns into much more important, making it important to maintain a detailed eye on ETF flows.”
At the identical time, the Coinbase premium has turned negative, exhibiting that US-based spot shopping for strain is lagging behind world markets.
Taken collectively, the information paint an image of a market that’s more and more pushed by leveraged hypothesis quite than spot demand. While derivatives merchants are positioning aggressively for upside, institutional participation through ETFs stays inconsistent, and US spot shopping for strain is weakening.
This leaves Bitcoin vulnerable to downside volatility. Crowded lengthy positions might rapidly unwind if value momentum stalls. Under such situations, even modest corrections threat triggering liquidation cascades, doubtlessly amplifying losses earlier than extra sustainable demand returns to the market.
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