Crypto Market Sees Billions Liquidated, Bitcoin Logs Weakest Month → Markets

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Briefing

The crypto market recently faced a significant correction, with over $2 billion in leveraged positions liquidated within a single day, causing major digital assets like Bitcoin and Ethereum to plunge. This event means investors saw rapid price drops, pushing Bitcoin to its weakest monthly performance since 2022. The impact is clearly seen in the Crypto Fear & Greed Index, which has plummeted to 11, indicating “extreme fear” in the market.

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Context

Before this news, many investors were likely wondering if the recent market strength was sustainable, especially after a period of strong institutional adoption earlier in the year. A common question was whether the crypto market could withstand broader economic pressures or if it was due for a significant pullback after reaching new highs in early October.

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Analysis

This market downturn was primarily triggered by a cascade of liquidations, where highly leveraged trading positions were automatically closed as prices moved against them. Think of it like a domino effect → when one domino falls, it knocks over the next. This initial selling pressure was intensified by a large Bitcoin whale selling over $1.3 billion worth of BTC, further increasing the supply on the market.

Additionally, record outflows from US-listed Bitcoin ETFs, totaling $3.79 billion this month, signaled a cooling of institutional demand. These factors, combined with broader risk aversion from a sharp pullback in US equities and uncertainty around Federal Reserve rate cuts, created a perfect storm for a significant price correction across the crypto landscape.

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Parameters

Total Liquidations → Over $2 billion in leveraged positions wiped out in 24 hours. This figure highlights the scale of forced selling that occurred across the market.
Bitcoin Price Drop → Bitcoin fell to as low as $81,000, marking a 10.4% decline over 24 hours and its heaviest monthly drop since June 2022.
Ethereum Price Drop → Ethereum slid below $2,700.
Bitcoin ETF Outflows → US-listed Bitcoin ETFs saw a record $3.79 billion in outflows this month. This indicates a significant withdrawal of institutional capital.
Market Sentiment → The Crypto Fear & Greed Index plunged to 11, signaling “extreme fear.”
Upcoming Options Expiry → A crucial $4.2 billion in crypto options are set to expire, with traders leaning into put positions. This suggests expectations of further price declines.

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Outlook

In the coming days and weeks, watch for the market’s reaction to the impending $4.2 billion crypto options expiry, as this could introduce further volatility. Also, monitor the Crypto Fear & Greed Index for any signs of recovery from “extreme fear,” and observe Bitcoin ETF inflow data to gauge whether institutional interest is stabilizing or continuing to wane. Any sustained accumulation by large holders, particularly around key price levels, could signal a potential bottom.

The crypto market is experiencing a significant rebalancing, driven by liquidations and institutional outflows, indicating a period of heightened caution.

Signal Acquired from → Investing News Network, TradingView News