Bitcoin Correction Appears Driven by Leverage Unwind as Over 90% of Supply Remains in Profit

• Leverage unwind, not spot panic: $132M in short liquidations triggered the drop.

• Over 90% of circulating BTC remained profitable, per on-chain data providers.

• MVRV Z-Score near 2.15 suggests valuation is balanced, avoiding extreme oversold or euphoric conditions.

Bitcoin correction: on-chain data shows >90% supply profitable and $132M in short liquidations — read COINOTAG’s analysis and implications for investors.

Published: 14 October 2025 | Updated: 14 October 2025 — Author: COINOTAG

What caused Bitcoin’s recent correction?

Bitcoin correction resulted primarily from a derivatives-driven leverage unwind rather than a wholesale sell-off by long-term holders. On-chain metrics from Glassnode and CryptoQuant indicate forced liquidations in futures and short positions accelerated the move, while realized-supply metrics show most BTC remained in profit.

Was this a 2022-style capitulation?

No — this sell-off lacked the hallmarks of 2022’s capitulation events. During Luna and FTX collapses the Percent Supply in Profit metric fell below 65%, signaling widespread panic. In contrast, the recent decline saw the Percent Supply in Profit stay above 90%. That divergence points to overexposed derivative traders, not mass spot selling by long-term investors.

Over 90% of BTC’s supply remained in profit

Data reported by Glassnode showed that more than 90% of Bitcoin’s circulating supply was still in profit at the low point of this correction. This distribution suggests realized losses were concentrated among recent entrants and highly leveraged participants rather than among long-term holders who control the majority of supply.

Source: Glassnode (data referenced as plain text)

No sign of 2022-style capitulation

Capitulation in 2022 showed clear on-chain signals: sharp drops in the Percent Supply in Profit and large movements of long-term holdings to exchanges. This episode lacked those signals. Exchange inflows from long-term wallets remained muted, and instead the evidence points at a mechanical deleveraging process within derivatives markets.

Source: X (chart and commentary referenced as plain text)

Leverage unwound, not confidence

CryptoQuant reported approximately $132 million in short liquidations around a key price zone during the event. Those liquidations created a rapid price move as margin calls and automated order execution cascaded through the market. The result was sharp but structurally corrective: excess leverage was removed and the market base was cleaned.

Source: CryptoQuant (data referenced as plain text)

Bitcoin long-term holders stayed composed

On-chain supply segmentation from CryptoQuant shows Long-Term Holder (LTH) supply remained steady while Short-Term Holder (STH) supply increased during the sell-off. Historically, LTH selling into a crash accelerates declines. The absence of that behavior this time indicates stronger holder conviction and less systemic contagion risk.

Source: CryptoQuant (data referenced as plain text)

Bitcoin’s valuation remains balanced

CoinGlass’s MVRV Z-Score registered near 2.15 at press time, a reading that implies Bitcoin is neither deeply undervalued nor in an overheated state. For context, historical bottoms have often shown MVRV Z-Scores below 1.0, while euphoric cycle tops have exceeded 6.0. The current score supports a view of measured accumulation rather than panic or exuberance.

Source: CoinGlass (data referenced as plain text)

Taken together, on-chain indicators and derivatives flow data point to a healthy market reset: leverage was flushed from the system, long-term holders held steady, and valuation metrics remain in neutral territory.

Frequently Asked Questions

How much of Bitcoin’s circulating supply was in profit during the dip?

More than 90% of Bitcoin’s circulating supply remained in profit at the low point, according to Glassnode on-chain metrics. That concentration of profitability indicates realized losses were largely confined to overleveraged traders and recent buyers.

Did Bitcoin’s latest drop mean the market collapsed?

No. While the drop was sharp, it reflected a derivatives-led deleveraging event rather than a systemic collapse. Long-term holder behavior, MVRV Z-Score readings, and measured exchange flows show this was a structural reset, not panic-driven capitulation.

Key Takeaways

• Leverage drove the move: Short-liquidations of roughly $132M triggered rapid price action and a mechanical unwind.
• Most supply remained profitable: Over 90% of BTC supply was in profit, limiting pressure from long-term holders.
• Valuation and structure are stable: MVRV Z-Score near 2.15 and steady LTH supply point to a balanced market ready for accumulation.

Conclusion

The COINOTAG analysis concludes the recent Bitcoin correction was principally a leverage unwind rather than a 2022-style capitulation. On-chain indicators from Glassnode, CryptoQuant and CoinGlass support a view of structural reset and measured accumulation. Investors should monitor derivatives open interest and LTH behavior for signs of renewed trend strength. For ongoing coverage, follow COINOTAG market updates.