Bitcoin is trapped on a “liquidation treadmill” where risky positions are being systematically hunted

Bitcoin's recent price movements are largely dictated by the mechanics of perpetual futures, which now constitute about 68% of BTC trading volume, trapping the market on a "liquidation treadmill." This cycle occurs because when funding rates are persistently positive, leveraged long positions become crowded and sensitive to small dips. When these positions breach maintenance margin, exchanges force liquidations, pushing the price lower and triggering subsequent liquidations in a feedback loop. This process explains choppy intraday volatility detached from macro narratives, as the market seeks out "liquidation hot zones" where forced selling is concentrated, such as near $80,000. The treadmill is broken only by a sustained reduction in leverage (seen through falling open interest and less extreme funding), a strong spot bid absorbing forced flows, or a change in the volatility regime, where spot demand ultimately determines if price levels hold after the derivatives-driven route.

(Source：CryptoSlate)