Bitcoin and Ethereum Sell-off Driven by Crypto-native Leverage

JPMorgan analysts think that crypto-native leverage rather than institutional exits should be blamed for the recent Bitcoin (BTC) and Ethereum (ETH) sell-off. While spot Exchange Traded Funds (ETFs) and CME futures absorbed minimal forced selling, JPMorgan noted that perpetual futures markets faced sharp deleveraging across both assets.

Bitcoin Performance Amid Crypto Market Crash 

At the beginning of October, the Bitcoin price went to an All-time High (ATH) above $126,000. 

Since that time, it has fallen by almost 15% to $106,885.07, its current value at the time of this writing. In addition, perpetual open interest has dropped from approximately $70 billion to $58 billion as of October 10. The $12 billion dip hints at forced liquidations and not an orderly position exit.

According to Farside Investors’ data, Bitcoin spot ETFs saw up to $70.4 million in net outflows, with most of these losses recorded on October 14, 15, and 16. 

This is quite minimal compared to the scale of the price move and the leverage flush in derivatives markets. In comparison to BTC, Ethereum saw an even more severe deleveraging relative to its market size. 

Ethereum Open Interest Drops to $19 Million

On October 10, its perpetual open interest went from approximately $28 billion to between $19 billion and $20 billion. 

This means that around $9 billion to $10 billion was lost. Also, spot ETH ETFs’ net outflows across October 9, 10, 13, and 16 came in at $668.9 million, with concentrated redemptions on Oct. 10 and Oct. 13. This is almost 9.5 times that of Bitcoin ETF outflows.

Apparently, there is a massive spike in institutional response to spot Ethereum ETFs. However, JPMorgan claimed that perpetual futures deleveraging was responsible for driving price action in both assets, while ETF flows show “little forced selling” even with the derivatives cascade.

Institutional Adoption of Ethereum Spikes

On the subject of institutional adoption, BitMine Immersion Technologies recently purchased more than 104,000 Ethereum at about $417 million. 

Before this purchase, the company already held about 3.03 million ETH. Therefore, this new acquisition further strengthens BitMine’s position as the largest holder of the second-largest cryptocurrency by market cap. 

Similarly, Huobi Founder Li Lin hinted at plans to raise about $1 billion to support a large-scale investment strategy focused on Ethereum. Lin’s family office is collaborating with some top investors to achieve this “Ether accumulation strategy.”