Futures Liquidations Hit BTC, ETH, XRP, and SOL as Prices Decline and Long Positions Unwind

Leverage Shakeout Likely Behind Crypto Market Pullback, Not Bearish Shift

The latest pullback in major cryptocurrencies is being attributed to the unwinding of overleveraged bullish positions — a long squeeze — rather than a surge in new bearish sentiment.

Over the past 24 hours, the CoinDesk 20 Index (CD20), which tracks the performance of the most liquid digital assets, dropped 6.8%. Bitcoin (BTC) edged down nearly 1% after briefly pushing past $120,000. Ether (ETH) declined 3%, Solana (SOL) fell 8%, and XRP posted the steepest loss at 13%.

These declines are accompanied by key structural signals in the derivatives market. Open interest in perpetual futures — the total number of active contracts — has fallen sharply across major tokens. XRP futures saw the largest drop, down over 6% in two days, followed by a 5% decrease in SOL and smaller reductions in BTC and ETH, according to data from Velo.

This retreat in open interest, coupled with still-positive funding rates, points to long positions being liquidated or closed — not new short positions entering the market. Funding rates remain above zero, signaling that longs are paying shorts to maintain positions, and that futures prices are still trading at a premium to spot.

This combination — falling prices, reduced open interest, and positive funding — is characteristic of a long squeeze. It suggests that overextended bullish bets are being flushed out, rather than new bearish momentum building.

“A long squeeze often serves as a healthy reset,” analysts say, noting that it removes excess leverage and resets market structure without necessarily changing the broader bullish narrative.

Had the selloff been driven by an increase in short bets, funding rates would have flipped negative, and open interest would have risen — neither of which has occurred.

In short, while crypto prices are down, market behavior signals a cleansing of overheated positions rather than a breakdown in sentiment. Traders are watching for stability to return as leverage resets and volatility subsides.

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