"Large part of crypto positions liquidated…liquidity still fragile"

In its latest weekly report, 10x Research said a large portion of excessive positioning in the cryptoasset (cryptocurrency) market has been unwound. However, it assessed that the overall liquidity backdrop remains fragile and structural inflows are limited.

According to the report dated March 1 (local time), the recent market pullback led to a pronounced liquidation of leveraged positions, while funding rates fell into percentile ranges near historic lows. Implied volatility was also reset (repricing), suggesting the short-term overheating has been cleared.

On the macro front, the report highlighted that the yield on the U.S. 10-year Treasury fell below 4%. It said that while this could be interpreted as a favorable condition for risk assets, it is still too early to be confident of a structural recovery in liquidity.

Flows into exchange-traded funds (ETFs) temporarily turned to net inflows, but the report said further confirmation is needed on whether this marks a sustained trend shift. In the options market, it noted that ahead of key events in March, both call and put positions are being built at the same time. This suggests strategies are increasingly focused on positioning for higher volatility rather than making directional bets.

10x Research added: "Technical overheating has largely eased, but without structural inflows to underpin it, it is difficult to conclude that a trend rebound is under way."