Crypto Liquidations Domino Effect

Crypto market just went through a sharp sell-off over the weekend Bitcoin briefly fell below key support level before bouncing back a bit. Even with that rebound, traders across the market lost about $2.5 billion due to forced liquidations.

• The culprits are: low liquidity and too much leverage.

The crash was mainly driven by forced liquidations.

Many traders were using leverage, they borrowed money to increase the size of their bets on rising prices. If the market moves the wrong way, exchanges automatically close those positions to repay the borrowed funds.

Prices started falling, $850 million in long positions were liquidated - those forced sales pushed prices even lower then lower prices triggered more liquidations and the cycle repeated, creating a chain reaction. By the end of the weekend, nearly 200,000 traders had their positions wiped out.

Bitcoin managed to recover some of its losses, but most other major cryptocurrencies didn’t bounce back as strongly.

• Ethereum (ETH) fell more than 8% in 24 hours
• BNB, XRP, and Solana dropped between 4% and 6%

Recent liquidation data shows the market was heavily tilted toward traders expecting prices to rise. In just 12 hours:

• $510 million in positions were liquidated
• $391.6 million were long positions
• $118.6 million were short positions

That nearly 3 to 1 imbalance shows too many traders were betting on an upward move in a market that didn’t have enough buying strength to support it.

Right now, crypto markets have thin liquidity - there aren’t many large buy or sell orders waiting in the order books. In this kind of environment even small waves of selling can push prices down fast, forced liquidations make moves even more extreme, also quick rebounds are possible, but so are sudden crashes.

Bitcoin’s fast recovery may look strong, but without deeper buying support, prices can easily fall again if negative news or economic concerns hit the market.

What Next

Watch $75,000 level for Bitcoin, it’s important psychological support zone. If stronger long term buyers don’t step in, the market could continue experiencing sharp drops and fast rebounds until a more stable foundation forms.