The cryptocurrency market faced significant declines early Monday, as major digital currencies like Bitcoin (BTC) and Ethereum (ETH) experienced steep losses. This downturn resulted in the liquidation of leveraged positions totaling approximately $1.5 billion. The recent slide occurred despite expectations of a dovish Federal Reserve interest-rate cut, which was anticipated to weaken the dollar index and foster increased risk-taking in cryptocurrency markets.
Alex Kuptsikevich, chief market analyst at FxPro, highlighted recent indicators signaling a downward trend for Bitcoin. He noted that BTC broke out of the upward channel it had maintained since early September, fell below key horizontal support levels, and dropped sharply beneath the 50-day moving average. Kuptsikevich warned that this combination of bearish signals suggests a continued decline is likely unless there is a significant change in market sentiment.
In the derivatives market, the top 20 tokens—aside from Bitcoin and HYPE—saw considerable declines in futures open interest. This decline was exacerbated by the price drops that forced many over-leveraged bets to unwind. On Binance, shorts seemed to be emerging, as open interest climbed from 270,000 BTC to 276,000 BTC, coinciding with near-zero funding rates in recent hours. Notably, funding rates for various cryptocurrencies, including TRX, ADA, LINK, TON, UNI, and Binance-listed 1000SHIB futures, turned negative, revealing a preference for bearish positions. Meanwhile, funding rates for Bitcoin and other major cryptocurrencies remained flat to slightly positive.
On the CME, front-month futures for Bitcoin continued to trade at a premium of approximately $100 compared to the spot price, which signals traders to watch for any potential shift into a discount—an indicator of increasing selling pressure. Additionally, on Deribit, put premiums surged relative to calls, as falling prices heightened demand for downside protection. This bearish sentiment also spread to options involving XRP and SOL.
Several altcoins suffered double-digit losses on Monday, with tokens such as PUMP, RAY, CRV, and TIA hitting their lowest values in over a month. This sell-off was further intensified by a liquidation cascade estimated at $1.6 billion, with about $500 million tied to Ethereum trading pairs, according to CoinGlass. Moreover, funding rates for Ethereum turned negative, signaling that short traders were paying to maintain their positions. This reflected a dramatic shift in sentiment following Ethereum’s rapid ascent from $2,400 in early July to nearly $4,831 by late August.
Despite the grim circumstances, it is worth noting that major cryptocurrencies like Bitcoin, Ethereum, and Solana are currently at critical support levels. As sentiment has turned bearish, there is potential for a recovery targeting traders who have adopted excessively aggressive short positions. Additionally, the average relative strength index (RSI) for cryptocurrencies is sitting at 28.4 out of 100, indicating heavily oversold conditions that may lead to a relief rally—provided that Bitcoin and Ethereum can hold on to their support levels.
