This time is different, BTC’s fall is not caused by leverage – analyst

Bitcoin prices fell to a nine-week low below $57,000 on May 1, losing a further 4% on the day. The asset is now down 11% since the same time last week.

Market dips and dips are not uncommon for crypto assets, but Glassnode analyst James Check believes this time is different.

Large derivatives-led deleveraging events were a major feature of the 2021 bull market and have been seen on several occasions this year, most recently in mid-April.

However, Check noted that they did not cause this week’s cryptographic error in a post on X on May 2.

Derivatives are not the cause

“Funding rates have cooled gradually, not violently, which is very healthy to see,” he said, before adding:

“It suggests we didn’t see a massive futures margin call yesterday.”

Funding rates are fees set by derivatives exchanges to maintain the balance between the price of the contract and the price of the underlying asset.

For those of you around 2021 #Bitcoin bull market, you’ll remember the massive derivatives-led deleveraging events that killed it.

Are we seeing derivatives get wiped out today?

I do not think so. 🧵🧵

Funding rates have cooled gradually, not violently, which is… pic.twitter.com/KSDoAMCVSF

— _Chess and checkmate 🟠🔑⚡☢️🛢️ (@_Escacmatey_) May 2, 2024

The analyst produced another chart showing that Bitcoin futures Open Interest (OI) has declined over the past year in BTC terms.

“This compares OI to market size and shows a relative reduction in leverage,” he added.

Open interest is the number of outstanding crypto derivative contracts that have not yet been settled.

Check acknowledged that futures markets also saw two significant deleveraging events prior to this selloff, but added, “Once again, it does not appear that derivatives were the dominant factor in this Bitcoin selloff.”

“Rather than a derivatives-driven selloff, I think it’s mostly timing-driven weakness, resulting from both short-term selling and weaker demand.”

According to Deribit, there is around $1.3 billion in OI for Friday’s Bitcoin options expiration event showing that demand for derivatives remains healthy.

Crypto Markets Bleed

The total market capitalization has fallen by more than $240 billion over the past week, to $2.26 trillion during Thursday morning trading in Asia.

The broader market is down 22% from its 2024 peak of about $2.9 trillion.

The technical analyst ‘Rekt Capital’ was not worried, stating that the markets have entered a historically recurring phase of re-accumulation.

#BTC

The more Bitcoin consolidates between current price levels and $70,000 after the Halve…

The further this cycle decelerates and resynchronizes with its historically recurring halving cycle with a peak in the bull market in mid-September/October 2025$BTC… pic.twitter.com/9WC97sXNbJ

— Rekt Capital (@rektcapital) May 1, 2024

BTC was trading at $57,469 at the time of writing, while ETH had fallen 2% to $2,920. Altcoins were a mixed bag today, but Binance Coin (BNB) and Toncoin (TON) were seeing bigger losses.

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