Bitcoin leverage builds as Ether warning turns outdated

Bitcoin derivatives traders are rebuilding bullish positions, creating a multibillion-dollar liquidation risk if the cryptocurrency reverses sharply towards $58,200, while an accompanying warning about Ether falling to $1,700 has been overtaken by market prices.

Bitcoin was trading near $65,400 on Friday, July 24, after reaching an intraday high of about $65,750 and falling as low as $64,636. A decline to $58,200 would therefore amount to a drop of roughly 11% from prevailing levels.

Liquidation heatmap estimates circulating among traders indicate that such a move could expose more than $4.38 billion in leveraged Bitcoin long positions to forced closure. The figure is not a forecast of actual losses but an estimate of positions that could become vulnerable as prices approach the specified zone.

The corresponding Ether claim requires greater caution. Ether was trading near $1,625, already below the cited $1,700 threshold. It is therefore inaccurate, under current conditions, to describe a move to $1,700 as a sharp fall capable of liquidating long positions. The estimate of more than $2.72 billion may have been generated when Ether was trading at a substantially higher price or may refer to a different heatmap interval.

Liquidation maps change continuously as traders open positions, reduce leverage, add collateral or move their stop-loss orders. Their projected totals also vary by exchange coverage, leverage assumptions, observation period and the methodology used to estimate unseen liquidation prices.

The Bitcoin estimate nevertheless highlights the risks created by increasingly crowded long positions. Traders have become more optimistic after the cryptocurrency recovered from levels below $59,000 at the beginning of July and moved above $66,000 during the week.

Demand for spot Bitcoin exchange-traded funds has helped support the rebound. The funds recorded about $203 million of net inflows during one session this week, extending their run of positive daily flows to six consecutive trading days. Those additions followed heavy withdrawals during May and June, when combined outflows reached roughly $6.9 billion.

The improvement has encouraged leveraged traders to increase exposure through perpetual futures, contracts that have no expiry date and use periodic funding payments to keep their prices aligned with the underlying cryptocurrency. When demand for long positions is strong, long traders generally pay funding to participants holding short positions.

Open interest across cryptocurrency derivatives was about $116.6 billion on Friday, while 24-hour trading volume stood near $156.5 billion. Liquidations over the same period were approaching $190 million, underlining the speed at which leveraged positions can be removed even without a major market-wide collapse.

Perpetual futures allow traders to control positions many times larger than the capital deposited as collateral. Some platforms offer leverage of up to 40 times, meaning a relatively small adverse movement may erase the trader’s margin and trigger automatic selling.

Those forced sales can amplify a decline. When Bitcoin moves through a price zone containing a large concentration of leveraged longs, exchanges close positions by selling into a weakening market. The additional supply can push prices lower, activate another layer of liquidations and create a cascade across exchanges.

Ether’s position remains weaker than Bitcoin’s despite signs of institutional demand returning to cryptocurrency products. Ether has struggled to regain the $1,700 level after falling below it, and its lower market liquidity makes it more sensitive to large derivatives orders.

The divergence also reflects different investment narratives. Bitcoin has benefited from its status as the largest cryptocurrency and the primary asset used by institutions seeking direct digital-asset exposure. Ether’s valuation remains tied more closely to activity on the Ethereum network, competition from rival blockchains, staking demand and the health of decentralised finance markets.

Macroeconomic uncertainty is limiting the broader recovery. Traders are awaiting the US Federal Reserve’s July 28-29 policy meeting, while concerns about inflation, geopolitical tensions and heavy spending on artificial-intelligence infrastructure have restrained demand for risk assets.

US regulatory developments have supplied some support. Debate over legislation intended to define the supervisory framework for cryptocurrency trading has strengthened expectations that digital assets will become more closely integrated with conventional finance, although the timing and final scope of the rules remain uncertain.