A sharp reset in crypto leverage may be setting the stage for a longer bull market, according to new research from Coinbase.
In its latest institutional monthly report, Coinbase says the recent washout wiped out speculative positioning, clearing the runway for fresh rallies in the coming months.
“Following the massive liquidation event on October 10, we believe crypto markets have found a near-term bottom and that positioning is now significantly cleaner. Markets appear to have reset rather than broken.
In our view, the sell-off has restored the system to structurally healthier leverage levels.”
Coinbase highlights that the crypto meltdown last month mostly annihilated retail traders, with institutional capital largely unscathed after employing risk management measures.
“Institutions were largely insulated from the deleveraging event. Many either kept their leverage exposure low and/or were concentrated mainly in large-cap names, whereas altcoins – held more by retail market players – bore the brunt of the liquidation cascade. As institutional appetite recovers, we could see crypto markets rebound, though this may yet take a few months.”
With excessive leverage removed and institutional capital mostly intact, Coinbase says crypto is poised for a three to six-month consolidation period where Bitcoin trades between $90,000 and $160,000. The crypto exchange also predicts that macro and regulatory tailwinds will push crypto higher next year.
“But we think the leverage flush in recent weeks has helped set the stage for a grind higher in the months to come. We believe macro tailwinds like Fed rate cuts, easing liquidity, and pro-crypto regulatory shifts under initiatives like the GENIUS/CLARITY Acts still bolster a bullish case, potentially extending the cycle into 2026.”
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