Open interest in Bitcoin and Ethereum perpetual contracts plunged 40%, showing aggressive deleveraging by traders on offshore exchanges.
The sharp crypto market crash last week, marked by massive liquidations, was likely fueled by crypto-native traders rather than institutional investors or retail ETF holders, according to analysts at JPMorgan.
A team of analysts led by Managing Director Nikolaos Panigirtzoglou claimed in a note released on Thursday that evidence suggests a significant deleveraging event is underway within perpetual futures, a favored tool among native cryptocurrency investors. Traditional market participants trading regulated products, such as spot Bitcoin ETFs or CME futures, didn’t panic as much.
The data from JPMorgan depicts the resilience of investors in exchange-traded funds. Spot Bitcoin ETFs saw $ 220 million in outflows between October 10 and October 14, or 0.14% of their assets under management. Withdrawals from Ethereum ETFs were a little higher, at $370 million (1.23% of AUM).
JPMorgan analysts said the figures suggested that ETF investors, typically retail and institutional players with longer-term horizons, did not engage in panic selling during the market downturn.
Futures numbers proved that CME Bitcoin futures, a popular trading ground for institutional investors, experienced minimal liquidations during the week. Selling was a bit heavier in CME Ethereum futures, but this was due more to algorithmic and quantitative traders (not large funds) cutting risk in response to increased volatility, JPMorgan said.
Those trends, the analysts said, underscore a critical shift in the market’s structure: Institutional and regulated investors are no longer driving violent price swings. Instead, that role has fallen back on “crypto-native” players operating in offshore and unregulated markets.
Perpetual futures signal sharp deleveraging
Although ETFs and CME futures were holding up, perpetual futures — an instrument that enables continual leveraged betting on cryptocurrency prices — tumbled significantly.
Open interest in Bitcoin and Ethereum perpetual futures decreased by around 40% in dollar terms, exceeding the actual decline in the spot price, according to JPMorgan. That sharp drop implies that traders had been forced to unwind positions as prices fell, adding momentum to the selloff.
The analysts said the trends suggested large-scale deleveraging by so-called crypto-native investors, many of whom trade on offshore platforms with high leverage. This crew, rather than ETF or CME traders, was the principal driver of the liquidation cascade, they added.
The correction on Friday, October 11, resulted in the liquidation of more than $20 billion in long positions from over 1.5 million traders, according to Coinglass data. The selloff was the largest liquidation event in crypto’s history, surpassing even the May 2021 crash.
Some of the catalyst was geopolitical news. Markets were in turmoil after President Donald Trump announced that he would impose 100% tariffs on Chinese tech imports, triggering a wave of selling across risk assets. Bitcoin, Ethereum, and altcoins all fell as traders sought to cover losses.
By the following Monday, Bitcoin had briefly fallen below $106,000 before rebounding partially. It was trading near $108,500 on Friday, approximately 2.5% lower than its value over the previous 24 hours.
Analysts reaffirm crypto fundamentals amid shaky sentiment
Still, with the record-setting liquidation, JPMorgan said the damage is concentrated more on speculators than on longer-term investors. Institutional flows from an ETF lens are steady, and on-chain data show no major outflows from cold wallets or custodial platforms, where large long-term holders typically store their holdings.
However, market sentiment remained fragile. The episode showed that leverage funding and momentum trading were still driving crypto markets, JPMorgan said, and that volatility was likely to remain high until more institutional engagement and oversight of offshore exchanges became common.
Investors and analysts are now watching to see if Bitcoin can establish a foothold above $100,000, a key psychological level for many traders, and whether leveraged positions start to accumulate again in the weeks ahead.
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