Altcoin Leverage Is Still Near This Year’s High. Could a Deeper Drop Wipe Out Traders?

As altcoin prices continue to slide, traders are still borrowing heavily. According to blockchain analytics firm Glassnode, more than 40% of large-cap altcoins are currently using leverage near their 2026 highs. In the mid-cap range, this figure has reached a yearly high.

Leverage means using borrowed money to trade, allowing a small deposit to control a much larger position. However, if losses exceed that deposit, exchanges will forcibly close the trade to recover their loan. This forced closure is known as a liquidation.

While prices have pulled back since altcoin leverage peaked earlier in October, many borrowed positions remain intact. The total market value of cryptocurrency fell by 3.2% in just 24 hours. Over the seven days to October 20, cryptocurrencies such as Ethena (CRYPTO:ENA) saw a drop of 10.9%, Pump.fun (CRYPTO:PUMP) fell by 9.6%, and Quant (CRYPTO:QNT) lost 4.9%. Meanwhile, Bitcoin slipped by 2% and Ethereum dropped 4.2%.

With traders still heavily invested with borrowed funds, could the next downturn liquidate long positions that survived the previous drop?

Why Traders Are Wary of High Altcoin Leverage

Glassnode tracks positions in crypto futures, contracts that let traders profit from price movements without holding the asset. Leverage metrics compare the size of open futures positions for a cryptocurrency with the collateral backing them. A higher leverage reading indicates more of that coin’s market activity relies on borrowed funds.

High leverage levels serve as a warning for traders. Forced selling can create a ripple effect. When an exchange liquidates a long leveraged position, it sells the asset to close it, driving the price down further and potentially triggering additional liquidations. Traders call this chain reaction a liquidation cascade.

On October 15, the market gave a glimpse of this potential. Liquidations reached about $850 million that day, with roughly $681 million—about 80% of the total—stemming from long positions held by traders who borrowed funds to capitalize on rising prices. Bitcoin (CRYPTO:BTC) dipped below $80,000 intraday before ultimately settling above $82,000, on its busiest trading day between October 11 and 20. Meanwhile, Ethereum (CRYPTO:ETH) traders did not reduce leverage before the drop.

What Glassnode’s 40% Leverage Reading Leaves Out

Glassnode’s 40% figure counts the number of coins involved, measuring each coin against its yearly high. A token that has used very little leverage throughout the year can still reach a peak, so this statistic indicates how many coins are over-leveraged relative to their history, rather than the total dollar amount of borrowed funds in the market.

Leverage also doesn’t indicate market direction. Short sellers, who borrow assets to profit from falling prices, also use leverage. When prices rise, exchanges may need to buy back those borrowed assets to close short positions; these purchases can drive prices even higher in what is known as a short squeeze.

However, it was the long positions that suffered the most on October 15. With leverage levels remaining high after that significant drop, many traders appear to be re-entering the market with borrowed money, setting up the potential for another wave of long liquidations.

Spot Buying and ETF Cash Could Ease the Altcoin Leverage Risk

Glassnode’s leverage data doesn’t account for spot buying, where investors buy coins outright with their own funds. This activity doesn’t show up in futures leverage data or on the blockchain, so readings could look the same whether spot buyers step in to soak up the dip or avoid the market entirely.

Two factors could help alleviate the situation. Traders could close their leveraged positions independently, reducing leverage without a market crash, or new cash could flow into the market in sufficient amounts to absorb any forced selling. An orderly reduction in leverage would be observed as a decrease in open interest—the total value of outstanding futures contracts—while prices remain stable.

New spot capital often first reaches Bitcoin and Ethereum through spot exchange-traded funds (ETFs) that buy these coins on behalf of investors. Many altcoins lack ETFs and may only receive this influx later, if at all. Therefore, an ETF-driven rally could boost Bitcoin while leaving leveraged altcoins vulnerable.

Market sentiment is also a critical factor. Bitcoin rose back above $82,000 on October 19 amid a broader market upswing, as oil prices receded. However, it couldn’t hold that level. Currently, Bitcoin trades at $81,511, down 0.7% over 24 hours, while Ethereum trades near $2,386, down 1.1%, and Quant trades at $194.

Could Altcoin Leverage Lead to Another Round of Liquidations?

We think so. Leverage is still hovering near yearly highs after an $850 million flush, suggesting new leveraged positions have replaced the liquidated ones. This scenario means that a further price drop could trigger another wave of long liquidations.

Smaller altcoins may take the biggest hit, as thinner order books let forced selling push prices down further. This risk extends to holders who don’t engage in leveraged trading, as market volatility can affect everyone.

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