[Analysis] "Bitcoin enters a stabilization phase…a substantial portion of excess leverage unwound"

An analysis suggests that the Bitcoin (BTC) market is moving into a more stable phase after undergoing a purge of excessive leverage. The assessment is that the market structure is shifting away from abrupt price swings toward one that responds more to liquidity and the macro environment.

According to Decrypt on the 28th (local time), Coinbase Institutional and on-chain analytics firm Glassnode said in their quarterly report, 'Charting Crypto: 1Q 2026,' that a substantial portion of excess leverage in the Bitcoin market was unwound during the correction in the fourth quarter of last year. As a result, the risk of cascading liquidations has declined and the market’s resilience to external shocks has improved, they explained.

The report said the current Bitcoin trend is closer to a stage where stability and sustainability are prioritized rather than a new speculative upswing. Unlike past cycles driven by high-risk, retail-led trading, global liquidity conditions, institutional investors’ positioning, and portfolio rebalancing are having a greater impact on price formation, it said.

The authors wrote, "The crypto-asset market is entering 2026 in a healthier state," adding that "excess leverage within the system was removed during the fourth quarter, the macro environment is broadly stable, and monetary policy is also moving in a supportive direction."

On the liquidity front, Coinbase’s in-house global M2 money supply index was presented as a key indicator. The index is analyzed to have led Bitcoin’s price by about 110 days in the past and is maintaining a positive trajectory this quarter as well. The report, however, added that it is necessary to be mindful of the possibility that the pace of money supply growth may gradually slow.

Stabilization signals are also emerging in derivatives markets. Bitcoin options open interest has surpassed that of perpetual futures, indicating that investors are opting for strategies that defend against downside risk rather than directional bets. Hedge-focused positioning, rather than an expansion of leverage, is becoming mainstream in the market.

Farzam Ehsani, co-founder and CEO of VALR, said, "In an environment where the Federal Reserve’s rate decisions and inflation indicators, political risks, and trade tensions are all acting at once, leverage-driven trading is not attractive."

On-chain indicators are also pointing to redistribution flows rather than abrupt capitulation. Bitcoin transfers increased late last year, but this was analyzed not as forced selling but as a process of long-term holders adjusting positions. The share of long-term holdings edged down, but signs of an exit from the market remain limited.

The report said investor sentiment has shifted from optimism to caution since October last year, and that unrealized profit-and-loss indicators are also reflecting the correction phase. Accordingly, it assessed that Bitcoin is likely to remain for some time in a stable phase characterized by slower price discovery and tighter linkage with macro variables.