According to a new report from CryptoQuant, the cryptocurrency market is undergoing a significant deleveraging event — with the Estimated Leverage Ratio (ELR) collapsing to -0.25 within just three days, a sharp move reminiscent of the June 2021 “China Ban” era.
This sudden decline marks the fastest drop in leverage since the crackdown on Bitcoin mining in China, where ELR reached -0.35, but over the course of an entire month.
Geopolitical Shock Drives Panic Exit
The rapid drawdown in ELR is largely being attributed to mounting tensions between the United States and Iran, which have rattled investor sentiment and triggered broad liquidations across crypto markets.
Key points from the report:
- Open Interest has dropped rapidly, reflecting a wave of forced and voluntary position closures.
- Liquidations were intensified by recent volatility, likely compounded by geopolitical uncertainty.
- Traders are actively reducing risk exposure, not just reacting to stop-outs, but pulling out preemptively.
Echoes of the “China Ban” — But Faster
While the market has seen deep deleveraging before, such as during the China mining ban in June 2021, the speed of this current drop is unprecedented. Then, it took weeks to reach similar leverage collapse levels. Now, the move has unfolded in under 72 hours, signaling just how sensitive the market is to geopolitical stress.
What It Means for Traders and Investors
A sharp decline in ELR is often viewed as a bearish short-term signal, reflecting anxiety and risk aversion. However, CryptoQuant notes that these extreme conditions can also present long-term buying opportunities.
For now, the market is in a state of heightened volatility and caution. Traders are advised that:
- Opening new leveraged positions carries elevated risk,
- Price action may remain erratic as sentiment resets,
- And structural support may emerge once forced selling subsides.
Conclusion: Fear Is High, But So Is Potential
With ELR at its lowest levels since one of the most disruptive moments in crypto history, the market is clearly shaken. But just as in 2021, strong hands and strategic accumulation could follow the panic. For now, staying cautious and watching for signs of stabilization may be the wisest move.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/investor-leverage-plunges-to-china-ban-levels-amid-geopolitical-tensions/