VanEck: “Bitcoin’s sharp drop is a deleveraging process…many downside factors have been cleared”

With Bitcoin (BTC) plunging about 19% over the past week and sliding to the mid-$60,000s, an analysis has emerged that this decline is less a panic-driven collapse triggered by a single event than a structural unwinding of excessive leverage that had built up.

Matthew Sigel, Head of Digital Assets Research at VanEck, wrote on X on the 6th (local time) that “this pullback is the result of leverage that had historically expanded to extreme levels being rapidly reduced,” adding that it “looks more like position reduction than disorderly liquidations.”

In fact, Bitcoin futures open interest (OI) fell more than 20% in just a week, from roughly $61 billion to around $49 billion. Considering that open interest topped $90 billion in early October last year, the market has already shed more than 45% of leverage from the peak. Over the same period, Bitcoin’s price also corrected by a similar magnitude.

Sigel explained that “the near-symmetry between the declines in price and leverage suggests the market has not undergone a disorderly breakdown, while also implying that a typical capitulation phase has yet to appear.” Total liquidations across the broader crypto market over the past week were estimated at about $3–$4 billion, with Bitcoin futures liquidations in the range of $2–$2.5 billion.

The pullback is also seen as coinciding with a deterioration in the external environment for crypto assets. Sigel said that “as the artificial intelligence (AI) investment narrative has wavered, appetite for risk assets broadly has weakened,” and that “this fed into selling pressure linked to Bitcoin mining companies.” As skepticism spread over large-scale AI infrastructure investment, miners that had been pursuing a pivot toward data centers reportedly sold Bitcoin to ease funding needs and balance-sheet strain.

Policy and governance risks have also come back into focus. Citing a recent case involving opaque equity changes at World Liberty Finance (WLFI), which is associated with the Trump family, he pointed out that “information gaps still exist in parts of the crypto ecosystem, weighing on investor sentiment.”

On volatility, another feature distinct from past down cycles is also emerging. While Bitcoin is currently down close to about 50% from its peak, 90-day realized volatility is around 38%—about half the level seen during the 2022 bear market (more than 70%). Sigel said “the fact that volatility is relatively low despite a deep price correction suggests a significant portion of downside risk has already been absorbed.”

Technical indicators have also entered an extreme oversold zone. On Bitcoin futures charts, the RSI has fallen to below 21—a level that in the past has often served as a precursor to price stabilization or a short-term rebound.

Sigel advised that “under the four-year cycle framework, the corrective phase may still be ongoing, but past cases show several meaningful rebound windows formed along the decline,” adding that “it makes sense to maintain long-term positions while taking a phased approach during periods when leverage, positioning and technicals are being washed out at the same time.” He continued, saying that “at current levels, the risk-reward looks increasingly attractive on a 1–2 year horizon rather than for short-term timing,” and added, “I bought more spot Bitcoin today.”