How crypto-native leverage drove Bitcoin sell-off while ETFs barely flinched
JPMorgan attributes the recent crypto sell-off primarily to the unwinding of crypto-native leverage in perpetual futures, not institutional ETF exits.Summary
JPMorgan analysts concluded that the recent downturn in Bitcoin (BTC) and Ethereum (ETH) prices was primarily driven by the deleveraging and forced liquidations within crypto-native perpetual futures markets, rather than significant selling pressure from spot ETFs or CME futures.
Bitcoin saw its price drop 13.1%, accompanied by a $12 billion drop in perpetual open interest (OI), signaling forced liquidations. Ethereum experienced even more severe deleveraging, with perpetual OI falling by $9 to $10 billion. While Ethereum spot ETFs saw substantial net outflows ($668.9 million), and Bitcoin ETFs saw minimal outflows ($70.4 million), JPMorgan noted that these institutional flows represented "little forced selling" relative to the massive cascade in derivatives markets.
The mechanics of perpetual flush involve leverage forcing liquidations when margin ratios slip, leading to reflexive cascades. The data supports this, showing Ethereum's OI fell by about 35% and Bitcoin's by 17%, indicating genuine deleveraging across crypto-native venues, particularly evident on October 10.
(Source：CryptoSlate)