Crypto Majors Experience Long Squeeze With Falling Prices and Futures Position Contractions

Leverage Shakeout Hits Crypto Markets as Bullish Bets Unwind

A sharp pullback in major cryptocurrencies appears to be the result of a long squeeze, not a wave of new bearish positioning, as traders unwind leveraged bullish bets.

The CoinDesk 20 Index (CD20), which tracks the top liquid digital assets, dropped 6.8% in the past 24 hours. Bitcoin (BTC) fell nearly 1% after failing to hold above $120,000, while altcoins faced steeper losses — ether (ETH) declined 3%, Solana’s SOL dropped 8%, and XRP sank 13%.

The decline coincides with a noticeable drop in open interest across perpetual futures markets. According to data from Velo, XRP futures open interest fell more than 6% in two days, while SOL, BTC, and ETH futures dropped by 5%, 1.5%, and 2%, respectively. These figures suggest leveraged traders are reducing exposure rather than opening fresh bearish positions.

Meanwhile, funding rates across all four tokens remain positive, indicating that long positions still outweigh shorts. Perpetual futures trading above spot levels — and requiring longs to pay shorts — points to continued bullish sentiment, despite the price correction.

This dynamic of falling prices, declining open interest, and positive funding rates strongly signals a long squeeze. Analysts say this type of leverage reset can be healthy for the market, flushing out excess risk and clearing the way for more sustainable upside.

Had the decline been driven by short sellers, open interest would likely have increased, and funding rates would have turned negative — neither of which has occurred.

Instead, traders appear to be voluntarily closing positions or getting liquidated, with no clear evidence of aggressive shorting. That suggests sentiment remains structurally intact, even as overextended longs exit the market.

In short, the downturn reflects position unwinding rather than a directional shift — a temporary shakeout that may offer longer-term support for market stability.