Ether and most other major altcoins were also still trading in negative territory in what one analyst said “can be seen as a healthy cleanse of excess leverage,” but market signs overall continue to point upward.

After nearly two weeks on the rise, bitcoin, ether and most other major altcoins tumbled as investors unwound leveraged positions in a course correction foreshadowed in last week’s crypto futures activity. Still, by late Monday (EST), prices were rallying.

Bitcoin was recently trading over $41,700, a 3.7% decline over the past 24 hours. The largest cryptocurrency by market capitalization dropped to as low as about $40,200 – off more than 7% at one point – on Monday (EST) in a roller coaster ride that started shortly after Asia markets opened. It was BTC’s lowest level since Dec. 3 when crypto markets surged amid rising investor optimism that the U.S. Securities and Exchange (SEC) will soon approve a long-elusive spot bitcoin exchange traded fund (ETF).

Read More: Signs Increasingly Point to January Approval of Spot Bitcoin ETF Applications

“It looks like this is a leverage adjustment, which can be painful but is usually good news,” Noelle Acheson, former CoinDesk head of research, wrote in her Crypto Is Macro newsletter Monday. “Last week, signals from the crypto futures market were starting to suggest that leveraged speculation was getting heated.”

Acheson noted that on Saturday, 8-hour funding rates, the amounts that traders invest to assume long and short positions, rose to their highest level since November 2021 when bitcoin reached its all-time high. The heated rate set off rapid selling of leveraged positions in a pattern that has occurred in bull cycles throughout bitcoin’s 14-year history.

“This happens often in crypto markets, and tends to be exacerbated by their global nature and their 24/7 trading,” Acheson wrote. “Usually, prices resume their previous trend once the dislocation has been digested. And these drops can be seen as a healthy cleanse of excess leverage. Indeed, bitcoin funding rates are now back to more normal levels, and the tailwinds for BTC and others are still strong.”

Traders have recently liquidated more than $455 in long positions and $62 million in short positions, according to Coinglass data.

Ether, the second largest crypto in market value, was recently trading at roughly $2,230, a 4.1% drop from Sunday, same time. ETH and BTC have performed similarly over the last few days after parting company throughout much of this year. Other major cryptos were also deep in the red with SOL and ADA, the tokens of smart contracts platforms Solana and Cardano, each recently off more than 2.1% and 5%, respectively. Both were off more than 6% at one point Monday.

AVAX and BNB were among the few day-long bright spots, and were recently up more than 9.3% and 4.42%, respectively.

Despite the general market swoon, the signals for BTC continued to point upward. In a Telegram message to Unchained, Strahinja Savic, head of data and analytics at Toronto-based crypto platform FRNT Financial, wrote that the recent volatility is “pretty typical for crypto,” but that “the bullish narratives driving bictcoin forward remain intact.” Savic highlighted the likelihood of a spot bitcoin ETF listing in January and percentage of bitcoin that remains unmoved over a year at about 70%, with the latter “an indication of long-term holding and commitment to the asset.”

In a message to Unchained, Joe DiPasquale, the CEO of crypto fund manager BitBull Capital, wrote that “Monday is often a day of more volatility in crypto markets as institutional investors return to the office to set sell orders and take profits.”

“Today’s test of $40K has the potential to either retest $38K as support, or set $40K as a new support line, from which it could rise again to the $44K resistance line,” he wrote adding: “We are keeping a close watch on news and markets this week for indication of further movements.”

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