Since the evening of July 23, major cryptocurrencies including Bitcoin (BTC) 
$91,967, Ethereum (ETH) 
$3,139, XRP, and Solana 
$143 (SOL) have experienced intense selling pressure. Within 24 hours, the market capitalization of the top 20 cryptocurrencies shrank by 6.8%. Bitcoin fell to $117,300, while Ethereum decreased by 3%, XRP by 13%, and Solana by 8%. Market data suggests that the decline was accompanied by a decrease in open positions and positive funding rates, leading to the liquidation of leveraged long positions in what is termed a “long squeeze.” It is noted that this downturn is not limited to specific cryptocurrencies but is spread across the market.
Accelerating Exit from Leveraged Positions in Futures Markets
According to Velo’s data on perpetual futures based on dollars and USDT in offshore exchanges like Binance, OKX, and Bybit, open positions in XRP fell by more than 6% within two days as of Thursday. The decrease was 5% for SOL, 1.5% for BTC, and 2% for ETH. These figures illustrate that traders are closing their positions to reduce risk levels and are swiftly withdrawing from leveraging. Consequently, the number of contracts has significantly decreased due to liquidations or voluntary exits.
The funding rates, however, remain positive, implying that the perpetual futures are trading at a premium compared to the spot price, where long position holders are paying those with short positions. Since the decline in prices is not caused by new short positions but by the liquidation of existing long positions, the consistent premium indicates that market participants maintain an upward fundamental belief, albeit with reduced leverage pressure.
“Long Squeeze” Shakes Prices
The reduction in open positions deviates from a typical short pressure where the number of contracts should increase with declining prices. Since positions closed through both compulsory liquidations and voluntary risk reductions, the market’s selling pressure was not artificially inflated; only leverage was cleared. Consequently, the price declines in BTC, ETH, XRP, and SOL were more a reflection of overoptimistic long position liquidations rather than a general position cleanup.
Market observers emphasize that the “long squeeze” is a necessary cleanup. With excessive leverage removed, price formation can occur on a healthier basis, creating room for potential new rises. Although the recent downward market movement technically appears negative since the evening of July 23, the removal of unsafe leveraged positions might fortify the market’s strength.
