Analysis: Bitcoin Leverage Overheating Eases as Market Sentiment Turns Neutral

On-chain data suggests Bitcoin market sentiment is shifting from neutral to mildly bullish.

CoinNiel, a CryptoQuant contributor, wrote on July 18 that Bitcoin’s on-chain data points to the market moving into a neutral-to-mildly bullish phase. Leverage pressure in the futures market has eased, while short-term selling pressure remains limited.

Major exchanges posted a net outflow of about 204 Bitcoin on July 18, extending outflows to a second straight day. Still, cumulative net outflows over the two-day period were only about 225 Bitcoin.

CoinNiel said that was a positive sign, but not large enough to conclude the market had entered a strong accumulation phase.

Fund flows diverged across time frames. Over the past seven days, exchanges recorded net inflows of about 2,196 Bitcoin, while the 14-day measure showed net outflows of about 8,197 Bitcoin.

That indicates the market remains in a volatile rebalancing phase, with liquidity being reshuffled and no clear directional trend.

CoinNiel also cited derivatives indicators. The funding rate fell 52.8% from a day earlier to 0.00225, well below the seven-day average of 0.00520.

Long positions still hold a slight edge, but excessive leverage appears to have been largely unwound.

Open interest stood at about $21.3 billion, up 0.24% from a day earlier. But it remained below levels seen seven and 14 days earlier, suggesting only limited position re-entry rather than aggressive new leverage.

Current on-chain data supports the odds of a neutral-to-mildly bullish scenario at about 55%, CoinNiel wrote. The key signals to watch are whether exchange net outflows expand and whether open interest rises gradually without another buildup in overheated funding rates.