Bitcoin Dip May Signal Early Unwind Amid Stretched Leverage and Fading Sentiment

• Market Cap Decline: The total crypto market lost $300 billion in under a week, reaching $3.5 trillion, with Bitcoin contributing 53% of the drawdown.

• On-chain data remains steady, with unrealized losses below capitulation levels, suggesting no widespread panic selling.

• Fear and Greed Index fell to 31, reflecting defensive positioning as open interest dropped 4%, driven by psychological factors over macro influences.

Discover why Bitcoin’s price dip is occurring in 2025 amid deleveraging and sentiment shifts. On-chain strength signals potential recovery—stay informed on BTC trends and investment strategies today.

What is causing Bitcoin’s recent price dip?

Bitcoin’s recent price dip is primarily triggered by a deleveraging event in the cryptocurrency market, where sharp volatility led to over $1 billion in liquidations. This BTC-led movement erased nearly 53% of the $300 billion drop in total market capitalization, pushing BTC below the $110,000 support level. Despite favorable macroeconomic conditions, psychological factors and positioned flows have overshadowed technical and broader economic drivers.

How has on-chain data influenced perceptions of the Bitcoin dip?

On-chain indicators provide a contrasting view to the surface-level volatility. Unrealized losses currently represent only 1.3% of Bitcoin’s market cap, far below the 5% threshold that often precedes capitulation selling. This level underscores sustained holder conviction, even as the market flushes out overleveraged positions. Data from CoinGlass highlights that long positions suffered the most, with $954 million liquidated, forming a classic bull trap against dovish expectations. Such metrics suggest the dip may serve as a healthy reset rather than a sign of deeper structural weakness, allowing for clearer price discovery moving forward.

The market uncertainty has Bitcoin investors on edge.

In less than a week, the total crypto market cap has shed roughly $300 billion, dropping to around $3.5 trillion. Bitcoin accounted for nearly 53% of the drawdown, confirming that this was a BTC-led deleveraging event.

While momentum hasn’t turned fully bearish, the timing of recent market moves has surprised traders. Despite favorable macro conditions, sharp volatility led to over $1 billion in liquidations, shaking investor confidence across the board.

Source: CoinGlass

Looking closer, longs bore the brunt of the move.

Around $954 million in long positions were wiped out, signaling a classic bull trap as the market moved against macro expectations. This trapped longs and triggered a 1.6% dip, pushing BTC below the $110k floor.

And yet, on-chain data tells a steadier story.

Unrealized losses account for 1.3% of BTC’s market cap, at press time, which is well below the 5% level that typically signals early capitulation.

That shows holder’s conviction is still intact despite the flush. Given the context, does this setup point to a healthy reset?

The BTC cycle shifts: Mindset over mechanics

The Fear and Greed index shows a clear psychological shift in BTC’s cycle.

Ahead of the FOMC, the index climbed nearly 10 points to 42, pulling back into the neutral zone. The market was clearly leaning dovish, with BTC Open Interest (OI) pushing to a two-week high of $74 billion.

But the move quickly unraveled. The market faded the bounce, sending the index back into fear at 31 as OI contracted about 4.05% to $71 billion. In short, sentiment turned defensive, with traders de-risking into volatility.

Source: CryptoQuant

And yet, Bitcoin’s OI–Price Divergence (%) metric has flipped red to 10.35%. This signals that leverage remains stretched, even as price action cools, with BTC now being driven by position flows rather than spot demand.

In fact, the metric has climbed to its highest level since mid-August.

Back then, BTC dropped to $107k after three red weekly closes off its $123k ATH. With a similar setup forming, a breakdown can’t be ruled out, with analysts eyeing the $100k–$105k zone as the next correction pocket.

In this context, Bitcoin’s cycle appears sentiment-driven, rather than structural. Unless momentum flips, BTC risks a deeper flush, with the current dip resembling the early phase of a broader unwind rather than a healthy reset.

Frequently Asked Questions

What are the main factors behind Bitcoin’s 2025 price dip and liquidation surge?

The Bitcoin 2025 price dip arises from deleveraging pressures, with $1 billion in liquidations dominated by $954 million in long positions. This occurred despite positive macro signals, as stretched leverage and unexpected volatility trapped bullish traders, leading to a 1.6% drop below $110,000, per CoinGlass reports.

Is the current Bitcoin dip a sign of long-term weakness?

No, the current Bitcoin dip does not indicate long-term weakness. On-chain data from sources like CryptoQuant reveals unrealized losses at only 1.3% of market cap, below capitulation thresholds, while holder conviction remains firm. This suggests a temporary reset driven by sentiment, with potential for recovery as leverage unwinds.

Key Takeaways

• Deleveraging Dominance: Bitcoin’s dip marks a BTC-led event, accounting for 53% of the $300 billion crypto market cap loss, with liquidations exceeding $1 billion.
• On-Chain Resilience: Unrealized losses at 1.3% signal no panic, supporting the view of a healthy flush amid intact holder positions.
• Sentiment Shift Insight: Monitor the Fear and Greed Index and OI divergence for signs of reversal, as psychological drivers now outweigh macro factors.

Conclusion

Bitcoin’s recent price dip highlights the interplay of deleveraging, stretched leverage, and psychological shifts in the 2025 market cycle, with on-chain data affirming underlying strength. As sentiment stabilizes and positions realign, BTC holders may find opportunities in this reset phase. Investors should track key metrics closely to navigate volatility and position for potential upside in the evolving crypto landscape.