The cryptocurrency market experienced a significant downturn early Monday, marking a notable contraction with the total market capitalization falling to approximately $3.98 trillion. As traders felt the impacts of the market’s instability, more than 390,000 individuals faced liquidation, leading to total losses of around $1.68 billion. The bulk of these liquidations stemmed from long positions, underscoring a severe shift for investors betting on price increases.
Among the major cryptocurrencies, Dogecoin was hit the hardest, plummeting by 10%, while Bitcoin demonstrated relative resilience, suffering a smaller decline of 2.3%. This comparative stability came as altcoins faced mounting pressure amid a tumultuous macroeconomic landscape. Ethereum, which also faced significant declines, dropped by 6.2%, while Solana fell by 6.9%, reflecting trends that saw many assets struggle.
Data from CoinGecko revealed a total market cap decline of 3.7% in a single day, marking a sharp shift in market sentiment. The impact of the liquidations resulted in over $1.68 billion wiped from positions across prominent exchanges, with more than $1.6 billion directly attributable to long trades, according to Coinglass. The largest individual liquidation order reached a staggering $12.7 million, linked to OKX’s BTC-USDT swap.
Industry experts noted the patterns emerging from this upheaval. Dan Dadybayo, research and strategy lead at Unstoppable Wallet, commented that the sharp drop in liquidations reflected a significant purge of leverage from the market. He noted that 95% of liquidated positions were long, indicating that this event was not driven by a short squeeze, but rather the consequence of overexposed bullish positions falling under pressure as major coins like Ethereum and Dogecoin faltered.
The prediction market Myriad, recently launched by DASTAN, showed that users were increasingly pessimistic about Bitcoin’s immediate prospects. A thin majority of predictions now forecast a decline to $105,000, shifting sentiment from expectations of surpassing $125,000. However, many still foresee Bitcoin maintaining its value above $105,000 through September.
The unfolding situation highlighted a classic case of a liquidity spiral, with early liquidation disrupting leveraged positions and affecting overall market dynamics. Vincent Liu, chief investment officer at Kronos Research, explained that the initial squeeze on leveraged longs drained market liquidity, further widening spreads.
Despite the turmoil, experts expressed a cautious perspective. Liu emphasized that while liquidations reveal areas where capital was overly extended, the market’s depth could gradually rebuild through accumulation. He pointed out the heightened risks faced by large-cap altcoins and leveraged decentralized finance (DeFi) tokens, which are often among the first to experience liquidations in such scenarios.
As the market grapples with this wave of liquidations, the backdrop of economic uncertainty was further magnified by recent actions from the Federal Reserve, which saw little positive movement in market sentiment. Looking ahead, key economic indicators—such as Thursday’s jobless claims report and Friday’s PCE inflation data for August—are anticipated to shape the future trajectory of the market. Analysts suggest that a dovish reading could provide a much-needed respite, while any hawkish surprises might exacerbate the current stress within the crypto landscape.
